In an effort to tighten controls on banks and to prevent unlawful foreclosures, California legislators approved a bill Monday to prevent mortgage lenders from continuing foreclosure procedures on homeowners while simultaneously negotiating loan modifications.

Homeowners who are in any stage of talking with lenders about modifying their loans may not be foreclosed on. The law will also open the door for individuals to sue big banks over “robo-signing” errors, where banks signed off on foreclosure documents without proper review. A $25 billion settlement has already been made between most states and several of the major banks over this issue, but this California law will now likely begin a flood of lawsuits against those companies by upset homeowners.

The state’s website says there are currently about 500,000 Californians in the process of foreclosure, one of the highest numbers in the nation. The new law may lead the way for other states to allow ‘robo-signing’ lawsuits.

Many groups, like the California Labor Federation, cheered the legislation as a major protection for homeowners.

“While the big banks … fought this much-needed reform tooth and nail, in the end the legislature chose common-sense reform over the banks’ special interest power,” said Executive Secretary-Treasurer Art Pulaski in a CBS article. “That’s good for California and a positive sign for our democracy.”

Yet others see this as a step backward for the housing recovery. In an opinion piece in the San Francisco Chronicle John B. Taylor, a fellow at the Hoover Institution, and Douglas Holtz-Eakin, former director of the Congressional Budget Office, wrote

“One way or another,…excess housing has to be cleared off the market as quickly as possible… Intervening into this process to try to delay foreclosures will add uncertainty to the market and slow down the recovery process.” And they added, “With about 133,000 foreclosures completed in California in the past year, it is important not to clog the pipeline.”