Foreclosure Victims To Be Helped By State And Lenders

Governor Janet Napolitano of Arizona together with representatives of giant lenders like Morgan Chase, Wells Fargo, Washington Mutual and Countrywide as well as Arizona Bankers Association have chalked out a plan to help house owners in the state who will be facing the threat of increased interest rates on sub-prime mortgage loans. The plan envisages arming borrowers with mortgage information and contact points so that they can avoid foreclosures.

It is expected that when in 2008 mortgage rates reset for a higher niche, trillions of dollars will fall into the sub-prime kitty.

The role of the state is to break the fear psychosis of the borrowers and see to it that they actually contact the lenders. They will also check if the lenders are playing their part of reconciliation.

It has not happened suddenly. Several months previously the heads of Arizona Department of Housing and Arizona Department of Financial Institutions have been regularly meeting lenders to probe solutions. It culminated in this week’s meeting. The agreement was on the following lines.

The state and the lenders would work in tandem to help foreclosed victims – including those about to be threatened. The distressed borrowers would be prompted to come out of their shells and approach the connected parties by making use of hotline numbers and related web sites. All this must be done before the actual reset takes place. Time is of vital importance. Delay will be deadly. Lenders are to clear quickly all procedural matters regarding the borrower qualifying for the modification. Lenders were given the option of freezing the teaser rate and shifting the owner to a fixed rate mortgage. Data will be exchanged with the state agencies so that Arizona can keep a better track of foreclosures to gauge success or failure of the plan.

The governor said that the borrowers more often than not are ‘terrified to call a lender’ thinking that it will worsen matters. But actually the reverse is true. Lenders are most proactive when they know which specific lender is in trouble.

By the end of the third quarter this year more than 24,000 loans in Arizona are in foreclosure or about to enter its ring. It is predicted that one out of every five sub-prime loans will end up with foreclosure. It is not just Arizona – the clouds of foreclosure are darkening the skies of the entire country.

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