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Plea for foreclosure help
Democrats want aid, stricter rules
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SACRAMENTO — Calling the wave of home foreclosures that has hit California "an accelerating and exploding crisis," Democrats in the Assembly proposed a package of bills Thursday designed to regulate future mortgages and provide limited assistance to those facing the prospect of losing their homes.
Citing congressional estimates that nearly 200,000 foreclosure notices will be filed in the state over the next 15 months, Speaker Fabian Nuñez, D-Los Angeles, said the situation is so urgent that Gov. Arnold Schwarzenegger should call a special session of the Legislature to allow for immediate action.
"Given some of the shady loans that were provided to people if we think we're in trouble now, just wait to see what happens next," Nuñez said.
Most of the problem loans were those issued to higher risk, subprime borrowers.
Several of the Democrats' proposals are designed to prevent the future use of some of the features that made these loans problematic.
Specifically, they seek to ban prepayment penalties and to prohibit lenders from providing financial incentives to brokers who steer credit-worthy borrowers into more profitable loan products that are designed for higher risk customers.
Other proposals would prohibit the issuance of negative amortization loans, in which the principal increases even as the borrower makes monthly interest payments, and bar lenders from issuing loans without first documenting the borrower's ability to repay.
None of those proposals, if adopted, would provide relief to homeowners now holding subprime loans that will reset at higher interest rates in the months ahead.
Those loans are valid contracts with terms that cannot be changed retroactively by government.
Instead, in the hope of pressuring lenders to voluntarily make concessions, the Democratic proposals would require them to issue monthly reports detailing what they have done to contact and assist distressed borrowers.
In recent months, loan-service companies have issued public pronouncements of their willingness to work with borrowers to try to avert foreclosure, but studies have shown borrowers have had very little success at renegotiating the terms of their loans.
"We want to put an end to the happy talk and put a spotlight on the real problem," Nuñez said.
Schwarzenegger has focused his efforts on trying to persuade loan service companies and borrowers to renegotiate.
Last week, he announced four large firms handling a quarter of the subprime mortgages in the state had agreed to implement a fast-track process to provide relief to customers who are current in their payments but cannot afford scheduled increases.
In an appearance in Riverside on Thursday, Schwarzenegger called attention to those efforts and announced the state will kick off a $1.2 million public awareness campaign designed to let borrowers know about debt-counseling services that might help them avert foreclosure.
"We'll continue to lead on this issue," said spokesman Aaron McLear.
He said the governor's office had not yet been formally approached about the idea of conducting a special session on foreclosure issues. "We'll talk to the speaker about what legislative proposals he has in mind."
Posted by ecarson1958 on November 30, 2007 at 7:44 a.m. (Suggest removal)
I applaud the legislature for their attempt at regulating future loans to keep shady loans from going to funding. However, any loan signed already and funded is a legal contract and such the homeowners' purchasing those loans were more than likely obtaining the funding for the purposes of future profits and greed.
I can't imagine an educated person would really sign a Loan Document that would penalize them for a prepayment penalty, and then force them to pay substantially more money to continue with the loan? That sounds crooked, but don't those people have brains? Can't they read? Or did they just trust what the Loan Agent told them? Don't worry, every thing will be fine. In a couple of years the home will be worth a couple of hundred thousand dollars more and you can just sell the home and move up.
I feel that all of the homes going into foreclosure need to continue the process. The real motivation behind this desire to help from the Legislature is for the purposes of protecting the Property Tax Revenue. That money is the catalyst behind the desire to maintain the value of the Housing Market at it's present value. Think of the millions of dollars lost to local Governments in Property Taxes? This entire debacle is simply the Federal Governments attempt to help all of the local Governments need to bring in more taxes' to pay for the plethora of retirements for the baby boomers that will be leaving Government Office in the immediate future. All of the Government Pension Funds are tied to the GDP and inflation. However, the money that was invested originally using Pension Fund Savings were screwed up and lost by the Nasdaq's failure to continue it's runup and subsequent collapse in the late '90s. And now, again we are witnessing the failure using the investments from the Pension Funds in purchasing Securities backed by Mortgage Loans. These from undereducated investor's using the public's money, only following the daily news and then jumping on a band wagon that had already finished it's run. Their investment was too little too late to save the Pensions that are promised to the future retirees. Remember Orange County, filing for Bankruptcy not too many years ago?
Now, the Federal Government wants to save what is left before it too is lost to the failure of the Housing Markets' Investments. Again, we will see a repeat, only this time there will not be a rescue large enough to help the TRILLIONS of dollars lost from the retirees Pension Fund.
Ask your Legislature about that one instead of fixing the measly problem of the Loans with houses into foreclosure? It is the entire housing industry they need to figure out and the money they lost that was invested using your Pension Funds!!!!
Posted by lawson_wayne on November 30, 2007 at 8:23 a.m. (Suggest removal)
Well said e.
When will people and our politicians that a crisis can be turned into an easily manageable event if: We have the discipline to live below our means.
As to what Nunez calls shady loans, WC Fields said "You can't cheat an honest man".
Posted by Face on November 30, 2007 at 8:49 a.m. (Suggest removal)
Silliness. Housing market cycles, some compounded with other circumstances or another, have always existed. There are always those who are caught upside down when the worm turns. Before I get into state involvement into the loan industry, let me say one thing. Do you think, for a minute, that if/when there is still a housing surplus due to restrictions on loan borrowing, credit tightening, etc., that all those folks with less than perfect credit or do not have 100s of thousands for a down payment will have no options to buy these homes?? That is, you think the credit institutions will not find a way to give loans to these people in light of what I described? That being said, do not look to government to solve your problem here... do not ask for it.. be wary of its mention. You want to muck up something? Just add half private enterprise and half regulation, you end up with like we had with the electrical energy problems we had in this state. Don't ask the fox to tend to your sick chickens. The worm will turn, you need just wait.
Posted by insideedge on November 30, 2007 at 10:51 a.m. (Suggest removal)
e.carson,
The problem is when these people bought these houses they didn't care about anything except getting the house. They all knew what they were getting in to. Foreclose em all put their houses back on the market, sure prices will go down but that's a capital market. Who cares a few billion $$$ banks will go belly up, who cares! Soon enough with enough help from the government, we will be living in the old Russia.
Posted by Equitable_Enforcer on November 30, 2007 at 11:06 a.m. (Suggest removal)
I'm a senior who has done a reasonably good job of financial planning. I've retired a few times, still work, have essentially no debt and a low interest, very low mortgage payment on our dream home. Lots of equity, even in the worst market.
Yesterday I received a call at work ... one of a few received over the past month ... from a mortgage broker who tried hard to convince me that I needed to re-fi, to tap the equity for "investment." I listened. Then I asked, as always --- how would we remain cash positive with a drastically increased mortgage payment if on a fixed income? No answer, as always.
Perhaps consumer credit counseling, including a thorough evaluation of one's financial picture, should be made a requirement for anybody who is taking on a mortgage. That wold be similar to, but in more depth, than counseling required to obtain a reverse mortgage. I don't believe one dime of tax money should be expended to bail out people who have made mistakes. Trial lawyers are already making billions off the increasing trend in our country for people to not be held resposible for self inflicted miseries.
Posted by Freedom1 on November 30, 2007 at 11:46 a.m. (Suggest removal)
"Democrats want aid, stricter rules" and I want our citizens to take responsibility for their own actions. Part of that comes from having a decent education, obviously something lacking for the last couple of decades. But it doesn't take a "rocket scientist" to figure out that you shouldn't be buying something you can't afford and that you cannot rely on a ups and downs of the housing market to ensure your future returns. Dah!
Posted by holdenon_2000 on November 30, 2007 at 1:20 p.m. (Suggest removal)
Other should not have to pay for poor borrowing practices. These idiots bought homes they cant afford, rented out half the house to migrant workers, hoping to make a profit. Now the variable interest kicks in and they want to cry it is not fair. If you are that stupid to buy a home that you can not afford then you should lose your home. Investing is a gamble, so If you lose, then you cant complain. Would we force Vegas to give back all the money it has made on its slot machines, after all they are a suckers bet, just like the variable interest rate loans.
Posted by joeMomma on November 30, 2007 at 3:17 p.m. (Suggest removal)
any elected offical who uses my tax dollars to pay for idiots buying homes they couldn't afford and now are losing will NEVER get another vote from me. Grow up, people! The gov't is not there to bail out your stupdi foolish decisions.
Posted by Fay_Buddha on November 30, 2007 at 3:53 p.m. (Suggest removal)
HoRah!!! TimeArrow you tell them.
There is a lot of people out there that counseling wont help, because they will still jump into it even if everybody tells them not to. My mother is one of those people. House paid off a good amount of money in the bank from selling the family business, now no money in the bank and the house in hock. If she just listened to me at the very minimum she would have a home with no payments. As the old saying goes you can lead the horse to water but you cant make them drink.
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