California Real Estate – Success Claimed for Schwarzenegger Mortgage Rescue Plan

RISMEDIA, March 5, 2008-(MCT)-State officials said Monday that a plan touted by Gov. Arnold Schwarzenegger to aid troubled homeowners helped more than 17,000 struggling borrowers in December and January.

But it’s unclear how significant Schwarzenegger’s plan, announced November 20, has been.

Throughout last year, many lenders already were attempting to work out deals with troubled borrowers, and in October and November alone more than 19,000 were helped.

State Department of Corporations Commissioner Preston DuFauchard said lower interest rates that occurred after the agreement went into effect reduced the number of people with adjustable rate mortgages eligible for easier, streamlined help. He said that has allowed the lenders to concentrate on “harder” borrowers who have already fallen a few months behind on their payments.

“The agreement to help borrowers stay in their homes is working,” said DuFauchard, whose agency is monitoring the plan’s effectiveness.

Most of the borrowers who worked out deals with their lenders got their interest rates lowered or frozen, or got temporary relief from payments, the Department of Corporations said. December and January have seen less emphasis on freezing interest rates and more on repayment plans, he said.

The state’s findings on loan relief are similar to those released in recent weeks by the Mortgage Bankers Association and Hope Now, a national coalition of mortgage lenders. All show lenders are denting the foreclosure problem, but haven’t greatly slowed numbers of people losing their homes.

Despite the increased help, foreclosures still dominate: The lending companies told the state they took back 10,202 homes in California in January.

As the state released its results Monday, the San Francisco-based Community Reinvestment Coalition, which advocates for troubled homeowners, staged a news conference in Modesto to argue that lenders aren’t living up to promises to help borrowers.

“We’re still having a hard time getting viable workout solutions for homeowners who come to us,” said Martha Lucey, president and chief executive officer of Fresno-based By Design Financial Solutions, a loan counselor.

The report released Monday showed specific results only for January. They included:

–Lenders reduced interest rates for 2,958 borrowers, either below the loan’s starter rate or its scheduled reset rate.
–473 borrowers got their interest rates frozen for a period of less than five years.
–212 borrowers got their rates frozen for five years or more.
–3,494 borrowers got so-called “forbearances,” in which the lender agrees to suspend payments for a specified time.

The data for modifications and forbearances did not distinguish between subprime and prime loans. The data also do not break down results by individual companies.

The Governor’s Office estimates 500,000 subprime borrowers in California will see interest rates reset in the next 18 months.

When announced in November, the agreement was the first by a major government official to try to curb the nation’s growing foreclosure problem. The federal government followed with a similar plan weeks later.

DuFauchard said that the California agreement is making a difference by holding lenders accountable. But he cited obstacles to better results that include a growing propensity for people to walk away from their homes instead of working with lenders. He also said half of borrowers still don’t contact lenders when they get into mortgage trouble.

DuFauchard called the state’s agreement “one of a collection of things” being tried in the wake of 84,300 foreclosures last year in California. More than 10,000 of those were in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, said La Jolla-based DataQuick Information Systems.

“We’re really in a fluid market and the credit crisis hasn’t really eased,” he said. “My sense is these efforts all help. They add value. There is no silver bullet. Nothing is going to knock this out of the park, and if there is, no one has found it yet.”

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