Posted on 11/06/2008 9:19:19 AM PST by BGHater
The plan is part of an economic stimulus package the governor expects to put before lawmakers to spur loan workouts.
Reporting from Sacramento -- Gov. Arnold Schwarzenegger on Wednesday proposed a 90-day freeze in pending home foreclosures to give California's financially pinched homeowners more time to get new or more affordable loans.
The governor unveiled a foreclosure relief and long-term mortgage reform initiative as part of an economic stimulus package that he plans to put before lawmakers in a special session of the Legislature scheduled to begin today.
"The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes," Schwarzenegger said. "Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy."
The governor's effort is meant to slow the pace of foreclosures that hit a record high of nearly 80,000 during the third quarter, according to research firm MDA DataQuick.
The plan for "loan modifications" would be based on a formula proposed recently by Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., for rewriting tens of thousands of mortgages across the nation. Her plan emerged after the government's seizure of Pasadena-based IndyMac Bank.
Key to the governor's plan is a 90-day delay in the legal process of foreclosing on a home after an owner-occupier has received a notice of default. Lenders could avoid the 90-day freeze under the plan if they proved they were aggressively rewriting loans so that homeowners could afford to make lower payments and avoid foreclosures.
State officials say they expect a big demand for the loan modifications. But some financial institutions report that their early efforts have had limited success.
(Excerpt) Read more at latimes.com ...
Oh goody. This will stabilize things. Let’s put people who can’t afford their mortgages in 40 year terms at 3%. Hell, why not put them in 80 year terms? Why don’t we just PAY them a salary to live in their homes?
It appears that Governor Schwarzenegger has never heard of the Fifth Amendment.
The banks have a property right to foreclose on people who do not make their payments, and the government has no right to interfere that contractural right without giving the banks “just compensation” for the taking of their property for those 90 days.
I predict the gov will strong arm banks to rewrite ARMs into fixed rate mortgages at the rate the borrower first had. This will help folks that can no longer afford the loan after the ARMs adjusted higher.
OC Register - Nov 6, 2008
40 years...that’s a long time.
Can I get the same deal? Man, that stinks! I feel disenfranchised and taken advantage of by my lender who sold me something I could afford.
The 90 days will come and go, and people who are in over their heads in debt will still be with us, still living in houses they can’t afford. Meanwhile, the government will figure out how to loan debtors more money to help them get out of debt.
Resetting ARMs to fixed won't be attractive to those who owe much more than the house is worth, which is the majority. Getting to live rent free in a nice house they can trash and loot, and not having to pay property taxes or homeowners dues, is too attractive to pass up. In some states the foreclosure process can take 1.5 years.
Really you want neighbors that have at least 20% equity, not those just scraping by. Those with no equity aren't going to improve their property for the bank's benefit. Speeding up foreclosures to get this bubble over with will get the construction industry and economy restarted faster than letting things go downhill for a long time.
Translation - Another 90 days of free rent for those that haven’t paid rent for 6 months.
“Gov. Arnold Schwarzenegger on Wednesday proposed a 90-day freeze in government spending.”
“Speeding up foreclosures to get this bubble over with will get the construction industry and economy restarted faster than letting things go downhill for a long time.”
I think the fear is that as the bubble is deflated, there would be a domino effect on people not yet in trouble or sitting on a bad asset. That may be why the gov wants to take a more measured approach and try to prop up the situation. My fear is the government will over react and try to fix other concerns under the guise of this mess, like healthcare, college loans, or whatever.
If people are rightfully put out of their (bank’s) houses, what will the result be? Will the mortgage holders just spitefully burn down the house? NO. Will Warren Buffett buy them all to warehouse his money? Not likely.
Other people who can afford those house will buy them and move in. Net result: no change. People will be living in those houses. People who can afford them. Ans house prices will settle to real level rather than pretend level that bad lending practices created.
Is that really better though. The banks are taking 20%+ hit either way, so they can work with the current owner or take the hit with a new owner. I know each case is different and my understanding of this part of the economy is very basic as best, but it just seems that less damage is done somehow salvaging the current homeowners. Granted, each case is unique and some may not be salvageable.
You will someone will need to pay the maintenance.
You will someone will need to pay the maintenance.
Laws in caliornia are like mud flaps on 747 (useless)
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