Democrats seek action on lending issues
By: ZACH FOX - Staff Writer
Nunez leads call for special session, multiple bills | ∞
SACRAMENTO ---- Democratic state legislators announced plans Thursday to implement a package of bills aimed at slowing the tide of foreclosures and cracking down on dishonest lending.
Democrats asked Gov. Arnold Schwarzenegger to approve a special legislative session so they can enact the bills as soon as mid-December if the session is called immediately, Assembly Speaker Fabian Nunez said.
The bills would increase the number of counselors to help troubled borrowers and require lenders to send homeowners a list of their rights. The package would also limit the types of loans and mortgage fees.
Assemblyman George Plescia, R-San Diego, said he agreed with targeting unscrupulous lenders but warned against too much regulation.
"We need to make sure we don't overreact with legislation that makes it not a competitive market and adds cost to people who are buying homes," Plescia said.
He pointed out that although about 20 percent of subprime loans have defaulted, many consumers were able to purchase homes because of such loans.
RealtyTrac, an Irvine-based company that tracks foreclosures, announced Thursday that California has the second-worst foreclosure rate in the nation, behind Nevada. California has by far the highest total amount of foreclosures. RealtyTrac reported state foreclosures increased 213 percent during October from the previous year.
Nunez called the rate of foreclosures in California a greater threat than long-term water shortages or health care reform, the other topics the Legislature is supposed to be addressing in special sessions the governor called in September.
Lawmakers so far have failed to reach agreement on either of those topics.
"It's a more immediate crisis," Nunez said of foreclosures. "You better believe this is the biggest crisis we're facing today."
The bills proposed by the Democrats would also call for a ban on prepayment penalties that keep some homeowners from refinancing.
Officials said some lenders have already started contacting borrowers with interest rates set to escalate beyond affordability, something the Democrats hope to legislate.
"That's one of the things the industry has already done without a government mandate," said Dustin Hobbs, communications director for the California Mortgage Bankers Association. "We definitely want to work with the Legislature and government to work through this crisis. It's going to take support from both government and industry."
There are an estimated 2.3 million borrowers with poor credit records whose home loans are projected to reset at higher rates through the end of next year. There are fears many of those loans risk default, worsening the nation's soaring foreclosure rate.
As California's Democrats seek action on the state enforcement, U.S. Treasury Secretary Henry Paulson and federal banking regulators are working out the details of a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.
Paulson and the regulators met Thursday morning with loan servicing companies ---- which collect and distribute loan payments ---- and other industry executives. A formal agreement had not yet been announced as of Thursday but could be unveiled early next month.
"We've all agreed that there should be some sort of standardized approach to reaching more homeowners faster," said Treasury Department spokeswoman Jennifer Zuccarelli, who declined to name those at the meeting.
Federal regulators have developed differing proposals for what to do about the problem. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., has been urging mortgage servicing companies to agree to widespread, permanent conversions of adjustable-rate loans to fixed-rate loans for homeowners who are current on mortgage payments but unable to afford loans at higher rates.
However, Bair's proposal met resistance from the industry. Critics say companies would face lawsuits if they permit modifications that are not in the best interest of investors.
The Associated Press contributed to this report.
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.
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Owner wrote on Nov 30, 2007 4:45 AM:The legislature would do better to consider some automatic way to roll back property taxes. The need to pay property taxes will cause the next strangle hold on owners. With the artificial inflation of housing values the property tax rates for everyone have skyrocketed. IF the government wants to help the biggest population they should consider an automatic roll back of the taxes. By many accounts housing values have dropped between 15 and 20%. The government should drop the tax by at least 10% which would be a good starting point. Currently, you have to file paperwork with the county, including evidence that the value of your house has dropped before they will lower your taxes. Then the process would not have an effect until after this cycle, which would be too late. Action by the government should happen now, before Xmas!
common sense wrote on Nov 30, 2007 12:01 PM:The reason for the housing slump, there are no Predatory Borrowers left. They bought houses for twice what they were worth and had to have lied at some point in order to obtain a loan. They did this because some real estate agent told them the party would never end. Figuring out the value of a home is easy, after putting down 20% your monthly payment + property tax and utilities should be less than the house can be rented for. Mortgage companies know this and should never have lent more than a house is worth. Both sides were playing the market and should be held accountable. Predatory Borrowers should be foreclosed on and Predatory Lenders should take the hit and sell the foreclosure for what it’s worth, not for the ballooned loan amount. This leaves an estimated 50,000,000 to 75,000,000 people like me. I have been saving for a long time but refuse to buy a house for more than it is worth and refuse to take out a loan for more than I can afford. If this bailout of freezing interest rates takes place I will be pulling all of my money out of the companies involved (WAMU, Chase, GMAC). These millions of people also vote, so I would encourage all Senate and Congress officials to due something to block this bailout. Responsible people are not the people you can count on to have short memories. When house prices fall to a level that makes sense millions of people will buy. They will also buy products to enhance their homes. Letting this take it’s course will improve the economy. The real question is why our elected officials and officials from private companies (who make millions) don’t know this, when I do.
sickofgreed wrote on Nov 30, 2007 3:32 PM:The system is so corrupted. All the people who behaved responsibly are being punished and the corrupt people who lied when they filled out the loan documents are being rewarded. All the greedy people who took cash out of their houses and went on vacations and bought new Hummers are being bailed out. This crisis will repeat in the future because now everyone knows that greed and stupidity will be rewarded. If you are responsible, you're a sucker. This country is so corrupt.
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