California passes 90-day Foreclosure Moratorium

by Alan White

Governor Schwarzenegger signed a bill Tuesday imposing a 90-day moratorium on foreclosures in California.  The bill exempts lenders who have a modification program in place meeting standards set forth in the bill, including reduction of payments to 38% of a borrower's income (higher than the 31% DTI standard in the Obama Administration plan.)  Nevertheless a halt to at least some foreclosures is a key missing piece of the Administration's plan announced last week.  Outside of California and apart from lenders with voluntary foreclosure freezes, homes will continue to be foreclosed while the new program, and perhaps even the legislation to allow Bankruptcy Court restructuring, is rolled out.  This means not only needless home losses but also needless losses for banks, to the tune of about $125,000 per house in January.

While the Administration's new plan has some merit, it doesn't actually stop any foreclosures, which is the point.  Regrettably, the Obama/Geithner plan perpetuates two basic flaws with mortgage modifications to date:  payment reductions are temporary (5 years) so that we will have another payment shock crisis in 2014, and homeowners for the most part are not deleveraged, because principal writedowns are not a central part of the program.  To its credit, the Administration is sticking to its guns on supporting bankruptcy stripdown of underwater mortgages, but that will still require getting past the Blue Dogs in Congress. 

In upcoming posts I will report on this week's International Association of Consumer Law conference in Hyderabad India, perhaps including some topics other than the U.S. mortgage foreclosure crisis.

Comments

[Brian]

More liberal bullsh*t

Get these deadbeats out of the homes they "own" and make way for the sharks (like me) who have saved a deposit and have the income to support a mortgage now that prices have BEGUN to come back to a level that makes some sense based upon any of the historical means of valusing property.

Tell the Democrats (here and in the Fed) to stop trying to bolster real estate prices at unsustaintable levels to keep a few deadbeats in houses they never should have purchased in the first place.

Pay your mortgage or get out, losers.

[Katherine Charleix]

Dam if he does dam is he doesn't. Why are we so judgmental all the time? Can't we just for once have some compassion for another people that's not ourselves. Every body gives their opinion and the bottom line is that the government has to decide what is best for the country. Millions of americans are suffering in this economic crisis and millions are making money. Banks never loose. Even the ones that have gone banckrupt, they get bailed out.AF

[Rich]

Most people that can't pay their mortgage is NOT because they bought a home they couldn't afford. Its because they've either got laid off or had their hours cut (in order to save other peoples job) -- I cant believe some people are just IDIOTS!! Its time to stop bailing out Banks, Insurance Co and Auto makers and time to Bail out the people who those industries benefited from for so many years.

[Boris]

This will only create a backlog of foreclosures that will blow up on to the market like an atomic bomb and will drive the prices much lower than they are now.

http://www.realty55.com

[teamaguirre@yahoo.com]

If we are all connected and affected to and by each other, then it is better to build each other up!! than to tear each other and ourselves down.

[John]

While a moratorium is good to delay the process, won't really prevent a foreclosure. To do that, there is a lot of mortgage aid to help stop a foreclosure, and also refinancing out there to help you lower payments. Citigroup, Fannie Mae, The federal gov't FHA, many states, JPMorgan Chase, Wachovia, and Bank of America/Countrywide have committed to helping over 5 million homeowners between them keep their homes. Here is a good resource. http://www.needhelppayingbills.com

[K Sus]

I work for a real estate company that specializes in REO sales. While a delay in the foreclosure process effects us (and me) financially we do not push for a "solution" that will give us a temporary monetary gain while affecting thousands in a negative way. As others have mentioned I know a lot of people who have been foreclosed on and they are not deadbeats but for the most part have suffered due to the economy and can no longer afford their payments. Brian, you couldn't have said it better when describing yourself as a "shark". You might feel on top of the world right (in a delusional way) but you're not going to be too stoked when you grow up to be a lonely old man with nothing but money (if that) and an empty life. Grow the f' up.

[R.C.]

watch out for scammers like People's Choice Tim Hutchinson, Bill Lyons of LEI fame and Mehdi Amini the biggest scammer of them all. They will take your money and leave you in a lurch.

[John]

I love how people blame the economy for people losing there homes. It is all these people with ARM's, that just had to own a home. I remember when I was about 11 and I was looking at a sign that had numbers and said ARM, and I asked my mother what it ment. She gave me a light discription of what it was, and I told her it made no scence. What made them think they were going to be able to afford it anymore in a few years? And, well, I was right. Turns out there are millions of pathetic people out there that are dumber than an 11 year old. The american dream does not guarantee happiness....

[Melanie]

Hi John,

I'm afraid you'll find out as you grow older, that we have just witnessed the american dream you mentioned, killed, for most americans, dead in its tracks by predatory lending.

Possibly if you're very lucky you will live your life free of borrowers and lenders and never have to realize one day what really happened over the last years. In that case you will never change your opinion and will continue to be disdainful of the "pathetic" people who were gobbeld up by the banks.

However, there was more to it than you realized, and there were thousands of folks who had been affording their homes just fine for many years who were actually forced or cajoled into those exploding ARMs sometimes because circumstances left them no choice or because the banks were paying incentives to the officers and brokers who sold them those loans.

Here is a link that explains some of the details if you're interested:
http://www.examiner.com/x-9613-LA-Bipartisan-Examiner~y2009m5d7-State-Attorneys-General-prevented-from-defending-consumers-from-banks

[Ryan Schneider]

Man, I just can't stand how everyone keeps saying people where forced into loans they didn't understand by unscrupulous lenders. How about people start taking accountability for their own actions. They didn't complain when they were buying a house with no money down and didn't question why their payment was half of what it should be. These people need to be booted out of these homes and replaced with responsible people who waiting and saved until they can afford what they are buying.

www.RiversidePropertyManager.com

[Betsy]

To those of you who keep referring to forclosure victims as "deadbeats", I hope you someday find yourself in their shoes. My husband and I have always owned our homes, never missed a payment, never got into a loan we couldn't afford and had credit scores in the 800's. My husband was made a nice living and we lived within our means, had a nice savings and a retirement account. Two years ago he was laid off from his job as a regional manager in the Title Insurance business and has been unable to find another job. Never in a million years did we think that someone as intelligent and talented as he is would be unable to find work after 2 years. He has even tried to find a job selling used cars...no one wants to hire him because he made too much money before and there are too many other people looking for the same jobs. We continued to make our house payments for 18 months but now the savings and retirement are gone and the value of our home has plunged below what we owe on it (we bought it 7 years ago). We know too many other people in our position and they are good, hardworking people who lost their jobs to this horrible economy, they are not deadbeats. Sit on your high horse and judge all you want...I hope it makes you feel better. We never imagined this could happen to us...it can happen to anyone!

[Han]

Dear Betsy,
I know how you feel...
People will never know until it happens to them. best wishes for you..

[Ally]

Shark, You should be ashamed of the way you behaved here.

My husband and I had decent credit 690 and paid all of our bills of time. We had modest jobs. We got the dream of owning a home and talked to a loan agent. He got us into a loan with a 2 year fixed. Then we went to refinance and I asked for a 30 year fixed and impounds included. He said ok and we signed the mountain of paper work with out fully readying the detail. I found out 1 year later we were in a 2 fixed year interest only loan. So we go to refinance again to get a 30 year fixed rate loan. The loan agent said we should do a 1st and a 2nd. She said we had a few things that were 6 1/2 years old on the credit and about to fall off which would raise our credit score above 700 giving us a much better loan. She said to take a pick a pay loan for now then we would refinance in 6 months to the loan I wanted. Sounded good. Well then my husband got laid off so we waited longer to refinance then the economy crashed and we could not refinance.

Looking back I realize we were lied to the first refinance because we could never afford a 30 year fixed. The 2nd time we were talked out of it because we could not afford a 30 yr loan. If someone would have had the balls to tell us you cannot afford the full loan and we were above our head we would have sold our house and walked away with $60k in our pockets. Instead they told us we could afford it and they would help us. We ended up foreclosing, going through a BK and are devastated.

I believe most of the people loosing their house should not have been given a house in the first place. We should not have been given the loans as we could never afford a real loan. The foreclosures are cleaning up the mess made by mortgage agents and banks and I am sad to see my house go. I am sad for all the people who had a dream and were told yes you can have it all. The mortgage agents and banks just wanted a big commission check and they created a gross mess for hardworking decent people.

You shouldn't be so judgmental Shark. You don't have to have sympathy, however you don't have to be cruel and mean. You are a nasty person!

[Bonnie Veronica]

I worked as an Escrow Processor for many years before being laid off myself and having to take a much lower paying position. I understand the ARM loan product very well. Most of these buyers bought homes they could afford even when the Adjustable Rate kicked in. I saw almost every loan broker promise beyond a shadow of a doubt that their client would be able to refinance before the ARM took effect, a promise they couldn't keep. These people weren't stupid they probably trusted their loan broker who made up to $30, 000 (BTY) on the closing and had no idea they would be laid of or would loose income. I've worked for over 23years with no breaks in employment until just a few years ago. Now I earn less than half of my standard income.