California Response to Foreclosure Crisis Not Strong Enough, Consumer Groups Say
A coalition of California consumer organizations recently demanded stronger, swifter action on the part of the California Legislature in response to the subprime mortgage crisis at a press conference in Sacramento as well as in testimony before the Senate Banking Committee.
The organizations, including California ACORN, the California Reinvestment Coalition, Center for Responsible Lending, Consumer Federation of California and Consumers Union recommended a number of policy changes that would both assist current borrowers in crisis and protect future subprime borrowers.
"Two years ago, I had an affordable mortgage and owed only $9,000 on my home," said Dorothy Hicks, an Oakland resident and ACORN member. "After two refinances and thanks to details I was never told, I have no business and may soon have no home."
Ms. Hicks is not alone. California is projected to see nearly a half-million foreclosures among subprime loans originated between 1998-2006.
Yet, these organizations say California has taken no action to address the subprime mortgage collapse and the irresponsible lending practices that are at its root.
According to CRL, Ohio, Maine, Minnesota and, just last week, North Carolina, have already implemented strong legislation to curb the risky practices that permeate the subprime market. Numerous states are exploring ways to help borrowers facing foreclosure, including Colorado, New York, Massachusetts and Ohio, which have all created funding pools to help borrowers refinance into long-term affordable mortgages.
"With record levels of foreclosures and more coming, California's homeowners, housing markets and economic growth are all at risk," said Center for Responsible Lending California office director Paul Leonard.
"The state should lead efforts to reduce foreclosures, help borrowers and reduce risks for new subprime loans."
Among the range of the recommendations aimed at helping current subprime borrowers were:
* Emergency funding for foreclosure prevention counseling and legal assistance.
* Support for a lender-initiated moratorium on foreclosures.
* Aggressive state monitoring of lender loan modification efforts to keep borrowers in their homes.
* State-financed mortgage products to help at-risk borrowers refinance into long-term affordable mortgages.
The coalition also suggested a number of legislative changes to help protect subprime borrowers taking out loans today and in the future. These included banning subprime prepayment penalties, establishing a legislative ability-to-repay standard, with income verification and impound accounts for taxes and insurance, and cracking down on broker abuses by establishing stronger lender liability for broker actions.
AFSA members have put into place a number of practices to minimize foreclosures. These practices include investing in staff training that allows them to identify problems early and take steps to help borrowers manage their payments.
"Though recent foreclosure trends are extremely troublesome, we should remember that the vast majority of subprime borrowers make regular, on-time payments," said Lynne Strang, vice president of communications for AFSA. "Care must b taken that future generations of these borrowers are not denied the same opportunity. An appropriate balance should be struck." (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com/