Mortgage Meltdown Update Posted by money mom at 10/14/08 12:42 PM

Record numbers of homeowners are losing their homes to foreclosures and the foreclosure filings continue. In August, one in every 416 households in the U.S. received a foreclosure notice. Some states like California, Nevada and Arizona have been particularly hard hit. Though California experienced a significant dip in the number of foreclosure filings in September, due to new legislation that went into effect to build more safeguards into the foreclosure process, the Governor vetoed a bill that would have put in some longer term protections against the type of lending abuses that are at the root of the foreclosure crisis. I'm wondering, isn't leadership about protecting the public against a known danger, instead of asking taxpayers to rescue the mortgage meltdown culprits after the damage is done?

This one comes under the category of “Just when you thought it couldn’t get any worse.” The news headlines have been filled with stories about the serious foreclosure crisis in the United States. Homeowners throughout the country, in rural, suburban and urban areas are losing their homes in record numbers. According to Realtytrac.com, a company which monitors national foreclosure filings, one in every 416 households in the U.S. received a foreclosure notice in the month of August 2008.

If that weren’t bad enough, the numbers in California, Nevada, or Arizona are even more staggering. In Nevada, one in every 91 households received a foreclosure filing in August, representing an 89 percent increase from August 2007. In California, it was one in every 130 households. Arizona came in third with one in every 182 households receiving a foreclosure filing in August.

But in California, something amazing is happening. In the month of September 2008, the number of California Notice of Default filings, which indicate the start of the foreclosure process, declined by 61.8 percent, according to ForeclosureRadar.com, another foreclosure tracking company. This source attributes this decline to the implementation of SB 1137, emergency legislation sponsored by Consumers Union and other consumer groups in California, which became effective September 8, 2008. Authored by Senator Don Perata, this new law requires lenders to attempt to contact borrowers prior to filing a Notice of Default, or completing a foreclosure if the delinquency is at a later stage. To reduce unnecessary foreclosures, this new law encourages increased communication between borrowers and lenders and loan modifications as an alternative to foreclosures. While modifications are encouraged, there is no requirement that one take place. Not surprisingly, ForeclosureRadar commented, “We expect SB 1137 to have no long term impact beyond delaying the foreclosure process for homeowners, and slowing the overall recovery.”

While we don’t think that preventing unnecessary foreclosures is bad for the economy, we couldn’t agree more that SB 1137 is not a long term solution. SB 1137 deals with the “here and now” of the foreclosure crisis. That is why consumer advocates also supported AB 1830, authored by Assemblymember Ted Lieu. AB 1830 was intended to address some of the worst lending practices at the root of the hundreds of thousands of failed mortgages in California. AB 1830 was the promising legislation that proposed some workable solutions to preventing a future mortgage meltdown.

But an awful thing happened to AB 1830 after the California Legislature put the bill on the Governor’s desk. On September 25, 2008, Governor Schwarzenegger vetoed this critically important bill. Let’s remember that California is home to 1,300 foreclosures every business day, which are pushing housing prices down, eroding wealth from millions of homeowners and draining the state and local governments of critical revenue. In this environment, rather than standing up for the people of California, Governor Schwarzenegger stood with the mortgage brokers and bankers and missed the opportunity to put the brakes on some serious mortgage lending abuses. AB 1830 would have required brokers to put borrowers first by limiting some of the perverse incentives that encourage brokers to steer borrowers into inappropriate loans which are more likely to fail. We applauded Governor Schwarzenegger for signing SB 1137 and dealing with the immediate foreclosure crisis, but it’s a tragedy that he didn’t use his leadership to rein in abusive lending practices that will feed future mortgage meltdowns.

After a story like this, one has to wonder, who is looking out for the little guy? In this era of quick action bailing out failing financial institutions and using taxpayer dollars to fix something that’s broken-- instead of fixing the reasons for the failure-- there are very few bright stars in this very dark horizon. That’s why the CNN Story about Thomas J. Dart, the Sheriff from Cook County, Illinois is so energizing. Sheriff Dart rode into town just when I thought there were no true heroes left. Sheriff Dart said he will no longer do the lenders’ dirty work and declared a moratorium on foreclosure evictions in Cook County. In a matter of fact manner, the Sheriff said he is ready to take on the banks and lenders and blames the foreclosures on their irresponsible lending practices.

Too bad Sheriff Dart doesn’t have more influence in California and elsewhere. We could use someone like him looking out for us.

Norma P. Garcia
Consumers Union

comments (4)

1 Posted by Fran at 10/16/08 02:36 PM

Sheriff Dart - where is your twin in Las Vegas Nevada? How do you stop the foreclosure procedure once the bank has taken the property?
I need resources and information I can use to save my property.

2 Posted by Richard C. Fiore at 10/30/08 02:31 PM

On TV this morning a young couple were being interviewed as they were taking posession of a 1.2M +/- house that they now could afford due to the purchase price of 700K +/-. As I watched at how happy they were I could not help feeling for the family that had been foreclosed on. Why (and there is no why) didn't the mortgage holder make the same arrangement with the original owners? My understanding that the "bailout" was to allow the banks to due just that. As a business owner I am all for turning a profit, but I draw the line when it is unfair. D. Trump was bailed out because if he toppled so would his lenders. If the landslide of forclosures is not halted this country could topple (or our political system).
RCF

3 Posted by מחשבון משכנתא at 12/14/08 07:08 AM

Great post!

4 Posted by hard money loans at 12/24/08 02:15 PM

Now well into August, July foreclosure rates have already made their way to the headlines and news reports. Considering that foreclosures in many areas of the nation may be hard to track due to the shear volume of foreclosures, some areas with low levels of foreclosures should be right on the mark. However, that does not seem to be the case, as there have been articles with conflicting numbers for just about every state, and in this case, the small state of Hawaii.

According to an article published by the Pacific Business News on August 14, 2008, "Hawaii had 229 foreclosure filings in July, up from 70 percent from June and up 169 percent from July 2007." The article titled, "Hawaii ranks 40th for foreclosures in July," offered this data from a foreclosure data provider based out of Irvine, California.

Another article published on August 13, 2008, again from the Pacific Business News offered the following information on Hawaii foreclosures: "Hawaii had a record 373 pre-foreclosure filings in July."

The second article titled, "Hawaii homeowners are protected from fraudulent mortgage rescuers," referenced a competing foreclosure reporting company based out of Fair Oaks, California.

The difference in Hawaii foreclosure filings for July is a staggering 144 foreclosure filings, or a difference of 62%. Considering these numbers are far from similar, reports of "record" foreclosure filings should probably be kept off the record. Not to mention the percentage increase from one month to another is probably off the mark.

The Pacific Business News also has a responsibility to keep out incongruous figures from their reporting. It could have easily been researched and perhaps an article based on the disparity should have been explored as well