California has been one of the hardest hit states by the mortgage crisis. California has the second highest foreclosure rate in October with 85,420 California properties receiving a foreclosure notice which represents a 1 per cent improvement from September.
Nationwide foreclosure filings have dropped by 3 percent in October, a slight improvement but still 19 percent higher than last year.
This has caused a financial crisis devastating families and whole communities. The thousands of troubled homeowners could have some extra help going their way. New legislation is being proposed by a Democratic candidate for state attorney general.
The plan is backed by Assemblyman Pedro Nava, who wants to allow homeowners who have been served a foreclosure notice the chance of employing a state appointed monitor to help them lower their monthly payments.
When preparing for the bill, the Assembly Banking and Finance Committee headed by Nava heard testimony about loan modifications and the housing crisis as a whole. The results indicated that loan modifications have been ineffective and the families benefiting from them are very few.
One of the principle features of the Assembly Bill 1588, the loan modification under study, is that lenders would not be able to foreclose on homes that were undergoing loan modification procedures.
Nevada, which has the highest rate of foreclosure notices in the U.S, worked through a similar program to that proposed in California and the bill was enacted in May.
Barabara Buckley, Nevada Assembly Speaker gave her testimony in Sacramento, California when providing information on the results reaped by the program in Nevada: “Our program in Nevada has shown initial success in stemming foreclosures. While I understand the obstacles California faces as a non-judicial foreclosure state, I look forward to working with the California Legislature to find ways that a similar program could be implemented”, she commented.
Nevada’s results although far from a quick fix are encouraging. In just one month 3,330 homeowners have requested mediation, 1514 were processed, 888 cases assigned to mediators and 106 completed in that same month.
It is hard to see how this bill will help with the larger problem of homeowners that have good loans but are unemployed so any mortgage payment is too expensive. However if the only feature that is kept of this bill is that lenders can’t continue with foreclosure measures during the loan modification it will provide a much needed respite to troubled homeowners who just want a chance to pay their mortgage at an affordable rate.
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Benefits For All When Loan Modifications Work
Loan modifications have a bad reputation for being expensive on the customer and a gold mine for the greedy banks that offer them. It is true that a bad loan modification can be expensive and even lethal for a family’s economy. We saw this during the housing boom when owners saw their house value increasing with no end in sight and decided to “free” some of their locked capital by modifying their mortgage to have some cash to spend on their home, buy a car or go on the holidays of their dreams. This was all fine and good until financial hardship hits and incomes wobble and home prices topple.
To illustrate, just in Queens, New York, 100 families lose their homes to foreclosures. The President of Queen’s Borough, Helen Marshal blames the “mortgage lenders and realtors” who prey on uninformed homeowners “trying to plug into the American dream”. According the Marshall homeowners panic when they receive the foreclosure notices and don’t seek help due to shame and confusion.
Sadly the 100 families a week in Queens, the 13,000 homes in the city of New York and the 4.5 million distress foreclosures nationwide may have had or even have a chance to never occur with smart and fair loan modifications. This way everybody is a winner, families don’t lose their homes, banks don’t lose money but make more instead. However as Queen’s President said lack of information is often the worst culprit for foreclosures, home owners don’t know what to do, feel embarrassed to find out and end up losing all they have.
A good example of a success story in foreclosure avoidance is that of Philadelphia which New York City is trying to imitate. In 2008 the Mayor of Philadelphia Michael Nutter and the Association of Community Organizations for Reform Now (ACORN) started up the Philadelphia Foreclosure Diversion Program. The main resource the program offers is information and advice for home owners in risk of losing their home. Nutter admits that one of the hardest tasks of the program was to attract the homeowners in order to give them the information and advice. The program took drastic measures and Jehovah’s Witness style went from door to door to talk to the people that needed the help.
The results?
In Philadelphia alone 3,380 homeowners at risk have entered a pre-foreclosure mediation process, PFDF, 1,200 have reached an agreement and 1,500 are still in the process of being settled.
If you live in New York you can now call 311 to get advice on your home and the risk of foreclosure but wherever you live you can get advice and counsel from financial advisers, websites like ours and your bank that is very interested in coming to an agreement with you before foreclosure is even a risk.
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