California Governor Working To Ease Foreclosure Pain
California Governor Arnold Schwarzenegger has been working with four major mortgage loan servicers to help keep troubled homeowners out of foreclosure. Between them the companies, Countrywide Financial, GMAC Financial Services, Litton Loan Servicing and HomeEq Servicing, hold twenty-five percent of the servicing market.
The agreement that Governor Schwarzenegger worked out with the lenders comes from a proposal from the Chairwoman of the FDIC that urged lending agencies not to reset the subprime mortgage interest rates. Instead, she suggested that the lenders keep the subprime loans at their starting “teaser” interest rate as long as borrowers occupy the home, keep current on their payments and remain unable to afford the higher payments that would result from reset. Schwarzenegger is the first Governor in the nation to personally ask lenders to commit to helping troubled homeowners by ‘holding the line’ on pending interest rate resets of subprime adjustable rate mortgages (ARMs).
In his announcement last Tuesday, the Governor stated that this sort of cooperation from the lenders would keep tens of thousands of people from being foreclosure victims. He also was quick to point out that this preventative measure would not necessitate a government bailout or subsidy. In addition, he said that if the loan servicers are willing to meet their borrowers half way, they should not run when the lenders reach out. And that it was a two-way street that began the crisis and it will take a two-way street to extract us from it.
Subprime mortgage holders have been driven out of their homes when ARM interest resets skyrocketed their monthly payments upward by between $800 and $2,600 per month, placing them well beyond what they can afford.
California is one of the states that have the nation’s highest foreclosure rate because it is one of the places where many investors made speculative purchases during the boom in housing that preceded the current crisis. A survey last week showed that seven out of California’s sixteen major metro areas had the highest number of foreclosures in America. The same survey showed that California had 51, 259 foreclosure filings in September, the highest of any state in the union. Moreover, there are 500,000 more people in the state whose subprime loans are scheduled to reset during the next two years.
Not only are foreclosures devastating to entire families, the fall off has negatively affected housing prices in general and spilled over into neighborhoods and communities as well. Many people have lost their jobs as a result and several large financial organizations have either gone out of business or suffered major financial losses due to the situation.
Schwarzenegger also said that his administration is currently lobbying Congress to raise the existing limits for government-backed loans so more Californians might qualify for traditional fixed-rate mortgages.
The California Governor is working in every way he can envision to provide some easing of the pain to the state’s citizens due to the subprime mortgage crisis. Other Governors across the nation are also urging Congress and the White House to take swift action to provide the much-needed relief.
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The Governator comes through, I must say I am thoroughly impressed with his commitment. If only we could get our dictator to find such resolve.