June 27, 2008

Ray of Hope in California’s Foreclosure Crisis

The foreclosure crisis is far from over. California is home to 5 of the top 10 metropolitan areas with the highest foreclosure rates in the country. In 2008, the cities of Los Angeles and San Francisco are anticipating economies that will have shrunk by billions of dollars. The housing bubble that forecasters have predicted for so long has finally burst, and many California families are finding themselves trapped in non-traditional loans with adjustable rate mortgages that are poised to sharply increase.

There are 500,000 consumers in California who have adjustable rate mortgages that will reset to higher interest rates in the next two years, but according to Amanda Fulkerson, spokeswoman for the Governor’s task force on non-traditional home loans the state has seen a great number of homeowners who were able to resolve their situations with their lender and keep their homes. “Our goal is to keep as many people as possible in their homes,” said Fulkerson. “Keeping families in their homes is the best thing we can do for the families themselves, their neighborhoods and our state’s budget.”

The housing crisis is not just affecting Californians. Across the country, the housing slump is having a direct impact on the national economy. According to Realty Trac’s April 2008 U.S. Foreclosure Market Report, foreclosure filings in April throughout the nation had a 65 percent increase from April 2007.

The state of California is working to help bring homeowners relief. Governor Schwarzenegger negotiated with several of the nation’s largest loan companies last fall to give homeowners options on how to keep their home, and his interdepartmental task force on non-traditional mortgages is working hard to let homeowners know that there may be options to help them avoid foreclosure. The 90 Days of Hope campaign focuses primarily on assisting homeowners who have just received notice that their interest rates are going to jump to a higher percentage, leaving them terrified of not being able to make their payments. The Governor’s 90 Days of Hope campaign looks to educate homeowners on their options, which usually entails working directly with their lenders or government-certified mortgage counselors.

Many loan servicers are meeting homeowners halfway with solutions on how to avoid foreclosure, but homeowners must be willing to work with their lenders. The state-brokered agreement requires borrowers to still live in their homes, prove financial hardship and not be over 90 days delinquent. If they can meet these three categories, lenders have agreed to freeze teaser interest rates for a sustainable amount of time and streamline the processes that determines if homeowners qualify for a modification that ill lower their interest rate back to an affordable level.

To date, the state has held 17 mortgage prevention workshops with over 6,000 people in attendance and over 3,000 who consulted one-on-one with a lender representative or mortgage credit counselor about their options to keep their homes. Workshops continue to be scheduled and homeowners can also contact the Hope Hotline 1-888-995-HOPE to speak with a mortgage counselor or visit www.yourhome.ca.gov for more information.

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