Schwarzenegger Tackles the Foreclosure Problem
Governor Arnold Schwarzenegger announced that he will call a special assembly of the state legislature to facilitate the approval of measures that would stem the tide of foreclosure properties.
The governor reiterated that helping Californians keep their homes is of utmost importance to the state and that the only way to achieve that is to revitalize the economy. He explained that preventing foreclosures will hold back the rapid decline of house prices, provide the needed funds to assist troubled homeowners, save jobs and help stimulate the economy.
Among the central elements of Mr. Schwarzenegger’s package of proposals are:
- A loan restructuring framework that would reduce the mortgage loan to 38 percent of the total income of the household, giving homeowners the ability to pay with less difficulty.
- A 90-day suspension of foreclosure procedures for homes that have been served with notices of default.
- An option for lenders to opt out of the 90-day foreclosure suspension if they can show government authorities that they have better loan revision alternatives. Better alternatives would mean that the borrowers are not forced out of their homes, that property investors are rewarded with better returns and that homes do not simply become repo homes and sold at bargain prices.
Mortgage lenders will be advised to achieve the 38% loan-income ratio by lowering the interest rates for at least five years, by increasing the number of amortization years to 40 years and by deferring a percentage of the remaining principal to the last years of the loan period to provide the borrower with some flexibility for further refinancing or property sale.
Schwarzenegger also readied proposals to prevent the occurrence of another mortgage disaster. Among them are the following:
- Lending procedures and strategies will be modified so that borrowers will only be provided with loan levels that they can afford to repay and so that mortgage lenders and brokers will be deterred from making deceptive statements.
- Licensing prerequisites for loan processors will be standardized.
- Federal financial regulations will be enforced by state financial regulatory agencies.
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- Atlanta Homeowners Get Help on Foreclosures
