Consumer advocates have called for a moratorium on home foreclosures, warning that California is facing a tidal wave of foreclosures over the next year as more homeowners are hit with payment increases brought on by subprime loans and risky mortgages.
“The curve is really starting to go up,” said Alan Fisher, executive director of the California Reinvestment Coalition, a collection of nonprofit organizations and public agencies that advocate for the poor and minorities. “We’re seeing just the beginning of a problem.”
He told the Senate Banking, Finance and Insurance Committee on Tuesday that a six-month moratorium would give officials time “to figure out how to keep people in their homes.”
The Mortgage Bankers Association estimates that more than 46,000 California homes were in foreclosure in March and another 76,732 mortgage loans were seriously delinquent.
Witnesses warned the committee that the numbers would grow over the final months of this year and in 2008 as more homeowners face higher payments because of adjustable-rate mortgages.
“By all accounts, the big spike in terms of subprime mortgages is coming in the fourth quarter of this year and the first three quarters of next year,” said Paul Leonard, director of the California office of the Center for Responsible Lending, a nonprofit group that advocates for homeowners. “California is clearly ground zero for this problem nationwide.”
Subprime loans are made to borrowers with shaky credit histories or those who cannot always document their incomes.
Fisher and Leonard also called for creation of a fund to assist strapped homeowners in certain situations and for increased state oversight of mortgage lenders.
“It’s not really about banning specific (mortgage) products, but it’s about putting standards in place … so borrowers have a fair shot in the mortgages they receive,” Leonard said.
Bob Gnaizda, policy director and general counsel for the Greenlining Institute, an advocacy group for the poor and minorities based in Berkeley, said banks should create a $10 billion national fund to cover the cost of moving subprime borrowers into more affordable loans.
Companies representing lenders said they try to work with borrowers to rearrange their loans to avoid foreclosures but often have trouble reaching borrowers to discuss new terms.
“There really is no good outcome from a foreclosure action,” said Shane Ross, senior vice president of account management for Litton Loan Serving. “The lender loses money usually. We want to avoid foreclosure at all cost.”
Representatives of several state agencies that have some role in regulating financial institutions said they have stepped up their efforts through town hall meetings and a Web site to make borrowers aware of their options. They also say they are encouraging lenders to work out better loan deals with potentially delinquent subprime borrowers.
But several senators suggested the agencies should be doing a better job of overseeing lenders to prevent unscrupulous practices by lenders, real estate agents and others.
“It’s an uphill battle for us, and at times we’re chasing our tail,” said Jeff Davi, the state’s real estate commissioner, when asked about efforts to corral shady real estate agents who move from brokerage to brokerage.
The committee’s chairman, Sen. Mike Machado, D-Linden, said past budget cuts were partly to blame.
“We’ve taken away a lot of the regulatory staff they’ve had,” he said.
Machado has a bill in the Assembly that would require state-regulated lenders to determine if borrowers can afford to pay the full cost of loans when they reset to higher interest rates, not just the low initial rate.
He also said he hadn’t ruled out additional legislation to control lending practices.
“I don’t think homeowners should be preyed upon,” he said after the hearing. “That’s exactly what’s happening. They’re preying upon people who don’t know (what they’re getting into).”
Asked about state funding to aid embattled homeowners, he said money might be available in some regulatory agency budgets that could be used to help fund homeowner counseling groups.
As for a moratorium on foreclosures, Machado said he thought a homeowner’s complaint to the state against a foreclosing lender would trigger an investigation that would have the same effect as a moratorium.
Six months isn’t gonna give anyone time to solve the problem… actually the best answer is to allow the foreclosures, and have all parties involved learn their lessons.
Six months isn’t gonna give anyone time to solve the problem… actually the best answer is to allow the foreclosures, and have all parties involved learn their lessons.
Six months isn’t gonna give anyone time to solve the problem… actually the best answer is to allow the foreclosures, and have all parties involved learn their lessons.
What a crock. Why is it they always trot out the poor when they’re talking about foreclosures and not the H-2 driving mortgage broker who bought the McMansion back when they were pimping the neg-am ARMs to other wannabe Trumps?
What a crock. Why is it they always trot out the poor when they’re talking about foreclosures and not the H-2 driving mortgage broker who bought the McMansion back when they were pimping the neg-am ARMs to other wannabe Trumps?
What a crock. Why is it they always trot out the poor when they’re talking about foreclosures and not the H-2 driving mortgage broker who bought the McMansion back when they were pimping the neg-am ARMs to other wannabe Trumps?
I understand their desire to help homeowners in trouble, but first off, it was primarily the buyer’s fault anyway and sooner or later, they will just have to understand the simple fact that for a family with $60k in income/year in a home purchased for $600k at 100% LTV, there just simply ISN’T some other magical “affordable” loan out there.
Actually, there was… It was called an Option-ARM loan and I think we’ve seen how well that worked out.
I understand their desire to help homeowners in trouble, but first off, it was primarily the buyer’s fault anyway and sooner or later, they will just have to understand the simple fact that for a family with $60k in income/year in a home purchased for $600k at 100% LTV, there just simply ISN’T some other magical “affordable” loan out there.
Actually, there was… It was called an Option-ARM loan and I think we’ve seen how well that worked out.
I understand their desire to help homeowners in trouble, but first off, it was primarily the buyer’s fault anyway and sooner or later, they will just have to understand the simple fact that for a family with $60k in income/year in a home purchased for $600k at 100% LTV, there just simply ISN’T some other magical “affordable” loan out there.
Actually, there was… It was called an Option-ARM loan and I think we’ve seen how well that worked out.
