For Immediate Release: Contact: Aaron McLear
Tuesday, November 20, 2007 Sabrina Demayo Lockhart
916-445-4571
Tuesday, November 20, 2007 Sabrina Demayo Lockhart
916-445-4571
California’s Foreclosure Rate Twice the National Average
With California impacted more than any other state by the national home foreclosure crisis, Governor Arnold Schwarzenegger worked with loan servicers from Countrywide, GMAC, Litton and HomeEq to agree to streamline “fast-track” procedures to help keep more subprime borrowers in their homes. Together these four enterprises service more than 25 percent of issued subprime mortgage loans.
“With this type of cooperation from loan servicers, we can save tens of thousands of people from being added to the foreclosure lists. This common-sense approach does not involve a government subsidy or bailout,” said Governor Schwarzenegger. “Borrowers need to do their part too. If these lenders are willing to meet more than halfway, it’s important that consumers don’t run when they reach out. It was a two-way street that got us into this mess and it will be a two-way street that gets us out.”
The agreement the Governor negotiated with lenders builds off a proposal put forward by Federal Deposit Insurance Corporation Chair Sheila Bair that encourages lending agencies to keep subprime mortgage borrowers at their initial interest rate if they are living in their home, making timely payments, but can’t afford the loan “re-set”–or jump to a higher rate. A half million Californians have subprime loans that will jump to higher rates in the next two years. Bair’s proposal has been endorsed by the newspapers including the Wall Street Journal and New York Times as well as public and community leaders. Governor Schwarzenegger is the first to spur servicers to publicly commit to modifying loans in a streamlined and scalable manner.
Schwarzenegger also announced additional steps the state is taking to help homeowners avoid foreclosure.
Through a statewide outreach campaign, which will include public service announcements, the Governor will help reinforce the importance for consumers to reach out to their lender if they are at risk of foreclosure. The Governor will also continue to lobby Congress to raise federal loan limits so that more California families can take advantage of these secure products, rather than relying on subprime loans.
“Losing your home in a foreclosure is an emotional crash that can take years to recover from, but we don’t have to sit idly by and watch the American dream turn into the American nightmare. We must take steps at both the state and federal level to make sure future mortgages are on more sound economic footing. In the meantime, by working together, we can protect the American dream and our economy without hurting the American taxpayer,” said Governor Schwarzenegger.
Seven of the top sixteen metropolitan areas with the highest rates of foreclosures in the nation are in California, according to the latest data from RealtyTrac. In the Stockton, Riverside/San Bernardino, Sacramento, Bakersfield, Oakland, Fresno and San Diego metropolitan areas, there was an average rate of approximately one foreclosure filing for every sixty households in the last quarter. The Governor made his announcement this morning at a meeting with San Joaquin Valley elected, business and community leaders in Fresno, which ranked 13 on the list.
This year, Governor Schwarzenegger signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities. The Governor has also pledged to work with lawmakers in the coming year to take additional steps to protect homebuyers.
Earlier this year, the Governor directed his Cabinet to form the Interdepartmental Task Force on Non-Traditional Mortgages. California was one of the first states in the nation to form a task force to examine the alarming developments in the non-traditional mortgage market. The task force consists of leadership from two agencies and seven departments responsible for all aspects of this complex issue.
In September, the Governor made $1.16 million in Community Development Block Grant funds available to counties for consumer counseling and urged Congress to provide more funding for these programs in California.
The following additional resources are available for homeowners:
The agreement the Governor negotiated with lenders builds off a proposal put forward by Federal Deposit Insurance Corporation Chair Sheila Bair that encourages lending agencies to keep subprime mortgage borrowers at their initial interest rate if they are living in their home, making timely payments, but can’t afford the loan “re-set”–or jump to a higher rate. A half million Californians have subprime loans that will jump to higher rates in the next two years. Bair’s proposal has been endorsed by the newspapers including the Wall Street Journal and New York Times as well as public and community leaders. Governor Schwarzenegger is the first to spur servicers to publicly commit to modifying loans in a streamlined and scalable manner.
Schwarzenegger also announced additional steps the state is taking to help homeowners avoid foreclosure.
Through a statewide outreach campaign, which will include public service announcements, the Governor will help reinforce the importance for consumers to reach out to their lender if they are at risk of foreclosure. The Governor will also continue to lobby Congress to raise federal loan limits so that more California families can take advantage of these secure products, rather than relying on subprime loans.
“Losing your home in a foreclosure is an emotional crash that can take years to recover from, but we don’t have to sit idly by and watch the American dream turn into the American nightmare. We must take steps at both the state and federal level to make sure future mortgages are on more sound economic footing. In the meantime, by working together, we can protect the American dream and our economy without hurting the American taxpayer,” said Governor Schwarzenegger.
Seven of the top sixteen metropolitan areas with the highest rates of foreclosures in the nation are in California, according to the latest data from RealtyTrac. In the Stockton, Riverside/San Bernardino, Sacramento, Bakersfield, Oakland, Fresno and San Diego metropolitan areas, there was an average rate of approximately one foreclosure filing for every sixty households in the last quarter. The Governor made his announcement this morning at a meeting with San Joaquin Valley elected, business and community leaders in Fresno, which ranked 13 on the list.
This year, Governor Schwarzenegger signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities. The Governor has also pledged to work with lawmakers in the coming year to take additional steps to protect homebuyers.
Earlier this year, the Governor directed his Cabinet to form the Interdepartmental Task Force on Non-Traditional Mortgages. California was one of the first states in the nation to form a task force to examine the alarming developments in the non-traditional mortgage market. The task force consists of leadership from two agencies and seven departments responsible for all aspects of this complex issue.
In September, the Governor made $1.16 million in Community Development Block Grant funds available to counties for consumer counseling and urged Congress to provide more funding for these programs in California.
The following additional resources are available for homeowners:
The “HOPE Hotline” (1-888-995-HOPE or www.995HOPE.org), which provides free mortgage counseling 24 hours a day, seven days a week.
A website with helpful information for prospective homebuyers, as well as homeowners who are experiencing difficulty in keeping payments current: http://www.yourhome.ca.gov and the Spanish language version: www.sucasa.ca.gov.
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{ 34 comments… read them below or add one }
Come on gang! Someone bash the loan officer for renters being abuse by investors renting property!
Why not. We are accused of everything else. How about contaminated water. Can we get that charge too?
Cool. I’ve got a property you can rent. First month’s rent is $5000, next six month’s is a dollar.
Yes, I’m kidding. This bill will worsen things for bankers by making them hold onto properties even longer while they lose money. Not that I have any sympathy for them but this was not a foreseeable risk.
Any inkling of what will allow people to qualify for this treatment? Is there anything formal at all that has been agreed upon here? Who takes the financial hit of the written-off value of the loan?
Well, part of this problem was because they didn’t qualify the borrowers on the full payment.. even with exagerated Stated income.
I have a 30 year fixed at 6.25% with a heloc second. Why are they getting special treatment and paying less than me ? I provided two years tax returns and went full doc. (ok, so I am an underwriter, I am too honest)
While I understand there is a crisis, in reality you are rewarding people for taking the risk, in other words, now there is no risk.
I feel they should also take into consideration the manner they applied for the loan. If the income and loan documentation is fraudulent, they should understand that they violated the mortgage fraud laws, and they and their broker are subject to the FBI mandated critera.
This is rewarding bad behavior and conduct. What should be done is the borrowers can have their payment stay the same, BUT, there should be a state/lender lien on the property just like the down payment assistance programs, when they sell, they don’t make as much profit. Like a modification stating that the interest will be reimbursed to the lender after they sell the property in the future. It shouldn’t be free.
What a joke…No consequences..for fraudulent behavior..And don’t tell me it was all the brokers fault.
They are not rewarding people for taking a risk Sandy and who says they are getting special treatment. These are people who took out a loan that hey now cannot refinance out of. A loan that know one know would no longer exist and there would be no way once in the loan, to get out of it. This is about saving homeowners and also saving the homeowners like you who did not take one of these mortgages.
The people you speak of, when you say “What a joke…No consequences..for fraudulent behavior..And don’t tell me it was all the brokers fault. ” You are making generalities based on your opinion as that everyone must have been fraudulent and that is far from the case. That to me shows how you look at the world through narrow eyes.
I would open them a bit and see the “true” picture of what is really going on out on the street because based on what you commented on, it is far from true reality.
Don’t you think lenders made a huge risk? Now they will have to pay for those risks also. Just like the respectful and non-fraudulent homeowners who are being foreclosed on everyday because of bad loans.
Moe…did you not see that Sandy stated she was an underwriter? i am sure she has seen FAR more loans come across her desk than you did…. i agree with Sandy…too much easy credit…too much blame on the broker in a “i want it now” society. Stated income loans were the trend…borrowers HAD to sign their 1003s at the closing table,…..surely they KNEW that as a house cleaner their monthyl income was NOT 15K a month…..
I think the lender should help with those that were honest…but the one’s who were not and did the stated income..
you are back in the rental pool.
From what I gather and what Paul Leonard from the Center of Responsible Lending emailed was that these lenders have agreed to reach out to borrowers in ARM’s at or before reset.
There has been no talks that I know of that involves any kind of principle reductions.
I don’t care if she was Mr. Mozillo himself, she characterized all borrowers as being fraudulent and risky. That simply is not true.
Yes, there is a lot of blame on brokers and also homeowners but we both know that not all people should be labels fraudulent or crooked because they have a label. That is a form of discrimination and I think you agree, well at least on the broker side.
I agree with your comment 100% = “I think the lender should help with those that were honest…but the one’s who were not and did the stated income..”
Moe, you are wrong. These people are getting special treatment. Let’s take an example. You and Bill buy the exact same home and get the same exact loan, an ARM. Two years later, the ARM adjusts and you struggle to make the $1,000/month higher payment, but you pay it. Bill, on the other hand, is about to foreclose, but gets to keep his initial rate from your mortgage company with the prodding of the government. Is that fair? What about the guy next door that took out a higher rate fixed? Is that fair to him? Why should we supplement the losses of a company and a homeowner by paying our higher rate mortgage? What about the guy who rents because he did not want to purchase a house an over-priced market with an exotic mortgage and is patiently waiting for houses prices to come down? How is this not rewarding those that really could not afford a house in the first place? Moe, unless you are the Bill in this story, you lose. Geez, some people just do not get it.
Doner,
I realized a long time ago that life is not fair. It has always been unfair and always will be.
It’s a matter of taking in everything into perspective. This is about much more than giving people special treatment.
I understand exactly what you were saying and yes they are getting what you like to call “special fair treatment” but I would like to call “being saved”.
In all actuality by saving these people, it is saving Bill and all the neighbors from having their equity go down further.
Anyone can apply for a loan workout or loan modification with your lender or servicer. If Bill or the anyone is having a “hardship” then by all means.
As far as renters go, prices will go down far enough, even with loan modifications.
Not everyone will be helped. Many will not get a loan modification because they cannot prove income or have other issues. It’s not as if they are just freezing all mortgages. Just a case by case basis.
I say it’s better help Bill as opposed to no one getting helped.
As home prices crash in overpriced markets like California, many will find that their mortgages exceed the value of their home. I don’t see any economic incentive for anyone to hang onto a bloated mortgage on a depreciating property they can’t afford.
More logical homeowner solution for this mess:
1) Find a rental for less than half the monthly cost of home ownership.
2) After you pass a credit check and sign a lease, “reach out” and hand the keys back to the lender (let lender take huge deserved loss for irresponsible loans).
3) Use the monthly savings ($2,000+ in many instances) to accumulate a huge down payment on a much more affordable home within the next 2-5 years while rebuilding your credit rating (pay off credit cards, auto loans, etc).
Flooded with REOs that get dumped on an already glutted market, lenders will put further downward pressure on home prices for a more pleasant future homeownership experience
If this agreement comes to reality, everyone that has already had their loan reset and possibly those that have already refinanced into a fixed rate loan should sue the lenders for equality breaches. If they can get it to a jury trial I think there’s a very good chance they will win.
The entire system is a sham and to believe it was any particular part of the loan process is shortsighted. The bozos behind the curtain of the federal reserve created this environment and want this to happen. We are headed for a depression of historic proportions and the fed is 100% responsible for ALL of it. You are like many American’s that really have no clue of what is happening at the upper levels. You must have an open mind to accept the fact that our own government is crapping on us but that’s the truth. The federal reserve is a private corporation that the government made deals with beginning with The Federal Reserve Act of 1913. The “Great Depression” was created by these same group of men and we all know that history seems to repeat itself….over and over and over again. What short memories we have. Prepare yourself to fight back soon or be a victim…the choice is yours’. wake up America!
I was a loan officer for 30 years and Sandy is 100% correct. Sorry guys….liars are liars are liars and they deserve to lose it all. To hell with the government helping them because the government simply reaches in to MY pocket to assist these greedy morons. I say every man and woman for themselves and what goes around comes around dude.
ditto…some people just want to leech off others to survive. Cut em off and they sink or swim. If they sink, too bad. They took a risk and no one forced them to sign anything. Idiots.
So now you want the government to protect your equity? That stinks. Values will seek the level they should have peaked at 5 years ago but kept going as the result of easy credit. The wealthy bankers want this and KNEW it was going to happen. I know this to be the case but many will dispute my claims saying it harms the banks too so why would they WANT this to happen. Well, when you can simply print money out of thin air it really doesn’t matter if you take a house back in foreclosure because they had NOTHING before they printed that monopoly money. And you think that they care about your equity…are you insane? Watch the movie Zeitgeist on Google video and be prepared to puke. The corruption is so rampant you will have a difficult time digesting it all at once. good luck people….
Fat chance THAT will ever happen. How do you sue a lender that has gone belly up???
This amazes me. The banter that goes back and forth. Here’s my story. I have a buddy who’s a LO. He refinanced me once. I get a divorce and was awarded child custody (I’m a man) and I refi with my buddy who knows full well my predicament. I need money and I need to get out of the loan to get her off the mortgage. So he puts me into a 2/28. 6.75 and 11.75 respectivly. Now, a year goes by and my ex is bleeding me dry through the courts suing me every chance she can get. I have a car repoed because she won’t pay child support, then the bills start piling up. My credit was around 690 when I refied, and now I’m at a solid 510. You think I can refinance? I am so screwed. My children have been through hell and back and now I face losing my home because my buddy who I trusted put me in a cr$p loan that will be going up from 6.75 to 12.75 by Feb 2009. So, to all of you who say I’m a liar and I deserve what I get. Well, I guess I do in your eyes. But.. not in 3 innocent kids eyes. So hold your thoughts and stop being so judgemental. The world would be a bettwe place.
Just Enough - You are in a hard situation. But, it does not mean you deserve to have a house. Many people in your situation (including many of my friends) have to sell thier house and rent. Affording a house is out of the question. Entitlement is not the answer. I truely hope your situation gets better soon.
Interesting story but did all the people in the story have the same loan officer? If so, the analogy works, if not, you have a huge flaw.
What if then, Bill was steered into an arm as a financial strategy that enabled the loan officer to get the refinance in 2 years by showing an interest savings on paper to Bill? An under qualified loan officer can easily assume that the market is not cyclical and sell bill on a package of goods that really ONLY benefits the future refi for the loan officer. All things equal Bill could have gone fixed rate at purchase but was convinced that the arm would save a few bucks and could then refi in a couple of years to the prevailing rate that surely would be less than the pending adjustment. THEN a couple years come and the rate is irrelevant because the loan PROGRAM is gone and Bill is stuck because of bad advice from the loan rep whom of course holds no consequence.
If you are going to talk generalities…don’t assume all things equal unless everyone had the same options presented by the same source. I say bail them out, in the end, if you don’t, you may feel great because they were punished for making the wrong financial play but in the mean time you own property value took a tank because of he massive foreclosure rate and now your savvy decision to go with the fixed rate doesn’t save you from owing 30% more on your home than it is now worth. How open is your open mind???
No flaw. If the officer/company did somthing illegal, sue them. Bill signed and accepted the loan agreement, he was not forced to sign. We all get bad advice. It’s up to us to take care of ourselves.
“Bail them all out”??? So, people that did commit fraud get a free ticket? Are you insane? I do not care if my property takes a hit, it is not worth it’s phantom inflated price anyways!
Doner, why don’t you just slap him across the face? You sir have NO right to tell anyone who deserves a home or who is entitled to keep it. Do you just want the banks to take back all these homes as REO instead of modifing the loan terms? Probably so, maybe so you can buy them all up and rent them to your friends. What are borrowers to do with a flat real estate market with nothing selling?
Lenders need to work with borrowers. Nuff said.
I don’t see a lot off help coming for sinking mortgage holders. Too large of a percentage of these folks are in too far over their heads, and any small adjustments to their mortgages will not be enough to save them. There could be some prime borrowers who were guided into the subprime market that will get some help (when the bank ‘miraculously’ discovers they are elligible for prime lending) but they will be a small minority.
I expect the price of my property to fall in the near future, though I’m not particularly concerned. I don’t plan on selling in the near future, or if I do, my losses will be offset by the cheaper purchase price on the next house.
Just enough,
Given your circumstances, it sounds like you’d be in trouble with your finances without falling house prices or an ARM mortgage. You’re in a bad spot and I hope things improve for you and your kids. Try to let go of the house and look for your best options for the future. Don’t dwell too much on your anger as it can be very contagious, especially to young minds.
Technically what the state is doing is not good economics. Foreclosures don’t mean the population is all dead. It simply means properties are unaffordable. Meaning there has to be asset repricing. When those prices meet ability to pay, they would be snapped up again and the economy would be more sustainable. Attempting to keep people in these unaffordable homes simply means they would use way too much of their income for housing and this hurts the broader economy.
I spent $15k in costs and prepayment penalty to get out of an ARM and into a fixed rate mortgage and now all the people too stupid to read their loan papers are not only going to save that but end up with a lower interest rate than I have?!?!?!?
I don’t know about anyone else, but I think the help should be on a case by case basis, but the onus should not be on the consumer, it should rest with the lender. They have made a ton of money off the stupidity of others or as in my case, because there were no other options. As a cancer patient, I had to refinance three times just to pay bills for chemo and loss of income while I was sick and not covered fully by insurance. The last time into a 2/28 from 6% that would increase 1 1/2 points every 6 mos until it hit 13% & had to get a 2nd mortgage at 13% to pay down the remaining debt. I didn’t have a choice and thought I could refi into a fixed rate within the two years and you know the rest. My lender went belly up in the meantime. I recently found a bank offering to refi combining both loans into an FHA fixed rate loan. If I had not found a bank willing to work with me, I would have needed my lender to work with me and why shouldn’t they? I have faithfully paid my mortgage on time every month for 8 years, I have a lot invested in my home and maintain it well and I am committed to staying in my home for an additional 15 years. Why should someone like me be punished?
Anne & Just Enough thanks for sharing your personal stories as it puts a face on the crisis & help us understand that not every one who bought real estate was a speculator, or looking for easy money. People had reasons to get these mortgages. I am an LO & works for a large bank. We had since Aug 9500 people default on thier loans, however we worked with 7500 of them to help them avoid foreclosures. We did not excused their debt or rates, we allowed them to defer the interest payment for a short period of time. This way we are not being unfair to our good customers. We only modified to help them pay a little now & defer rest for later. Most people who took the deal were the honest hard working people with situations like Anne or Just Enough. Majority of the ones who didnt took our solutions were the speculaotrs and non-owner occ properties. these investors don’t want to hold on to a depreciating asset, and we as a bank have to eat up the loss for making a decision to lend to them. Which is cost of doing business. I donot favor a special treatment but a work out where we can ease the payments to pay some now and some later usualy helps the needy without rewarding or punishing anyone else. I hope other banks start doing the same and keep properties away from the market which will help stabilise the RE market & those who are paying their mortgages honestly & responsibly will not see their hard earned equity wipe off.
I think we have done a very responsible job. And would sure like to hear serious suggestions (no bantar please) on should other banks do this too.
Just Enough - My Q. is this…With a 690 Credit Score, why did you sign for a 2/28 Mortgage? Did you not “show” enough income on the books and have to do a “Stated” loan? There is something missing here.
Hi Moe,
I am new to the site, and glad to find it.
Have you any advice for those of us affected by the storm, who were told we would not have to have the three months at the end of the deferral period, only to find out they expected it? I resumed my payments in 3 months, and contacted my servicer. I paid my note for a year, until they refused to take any more, as they applied my Decl payment to the Sept. one, making me delinquent since. They have treated me as if I stopped paying without their approval, and refuse to approve me for mod., saying I don’t make enough…DUH. I lost most of my income after the storm for months. I knew I would not qualify for a loan, and was trying to avoid any situation which would require that.
I was duped into believing my president and my lender when they assured me I was allowed this assistance. Now I wish I had suffered through the 3 months, rather than have 2 years of being driven to the brink of ‘postal ol’ broad’ They are stealing my home and I need to stop them.
To the underwriters: Please don’t look at all people in foreclosure as ‘asking for it’. That’s like saying pitt bulls are bad, so all dogs are bad.
Greed is what seems to motivate a vast majority of these folks. It’s not as if they aren’t making enough as it is.
The loan I already had was current before the storm..I did everything I could to make sure this was something that would not destroy my life. I should not have to qualify for something I already qualified for, and be denied because I don’t make as much after a disaster as I did before.
I have been told that in order to keep my house, the only thing he can do is
let me pay $5000 dwn, and almost 2 x more per month for a year, or they take my house!
Can someone explain how I don’t qualify for a deferral-which would have been so simple..never mind what we were supposed to get- But, do qualify for some ridiculous ‘ransom’ plan, so high I am sure to kill myself trying to find a way to pay? Reminds me of the Carpetbaggers. Opportunistic feeders.
I am just a few days from seeing my name in the Sheriff’s sale, and didn’t do anything but believe what they promised..It is insane to expect disaster victims to be able to pay the entire amount after just 12 weeks, when many of them didn’t even have a home to go to. What kind of ‘disaster assistance’ is that?
Keep up the good work, as I fear we haven’t’ begun to see the trouble it will cause across the board, if these foreclosures continue.
Thanks,
Jw
Hi All,
I’ve read most of these post and as a Realtor I have seen my share of tricks used by consumers and brokers. But those are the “RARE” stories. My husband and I purchased a home 3 yrs. ago and were over and above honest. We have an ARM that will adjust in Sept.08. We have zero credit card debit but we still won’t be able to afford the adjust. We paid 425,000 and when we tried to refi it appraised for 395,000. We have never taken any money out of it because as a Realtor I know that is a risky deal as it is assumed equity. All we want is for our lender/service agency to let us keep the loan we have as we can make that payment and have never been late or refi (even though it won’t appraise now it will eventually go back up) what we owe at a fixed rate. We are just regular folks trying to stay ahead and in our American Dream. So I feel any help the Governer can get us by asking the lenders to have mercy basically is good. They get more money over time keeping people in the current loans than foreclosing on people who can’t pay the reset. I know there are people who did lie, etc. and got themselves into a mess but for the most part that is not the case.
Hi - just wanted to say good design and blog - cu Frank
Some of the opinions here totally ignore the fact that many homeowners were defrauded and had no idea what games and tricks the LO/broker was playing on them. THey went into these loans like a lamb to the slaughter.
We are currently the initial stages of foreclosure because of the fact that Accredited Home Lenders which is based in CA is refusing to work with us. They modified our loan by looking at my husbands gross pay instead of his net pay. With the house payments at 1,065 a month and his net income of 1,255 bi-weekly, that only leaves us 185.00 to pay the rest of our bills and live on. My company downsized and I have been out of work since January of this year. I’m looking, but the only jobs that are currently avail start at 7.00 and hour. I have also tried all of the programs that are here to stop the foreclosure and nobody can help us. Are we to file a Chapter 7 or just leave our home because of the fact that there are no Federal programs out there to help any one who has been behind or made late payments for some time?