Governor Lenders And Foreclosure

November 23rd, 2007 | Tags: Foreclosure

With the pain of foreclosures intensifying the administration is stirring itself. Governor Schwarzenegger talked with four giant lending groups – Countrywide Financial Corporation, GMAC Financial Services, Litton Loan Servicing LP and HomeEq Servicing. This quartet controls 25% of the loan market – that is they collect the mortgage payments.

If these loan servicers cooperate many may be saved from foreclosures. It is a practical common sense approach that does not need subsidy or any sort of bailing out. The borrowers must also come forward to ease the situation. Both the lender and borrower are responsible for the situation. Now both have the moral responsibility to clear the mess – is the opinion of the Governor.

The initial suggestion had come from Sheila Bair, the chairperson of Federal Deposit Insurance Corp. She wanted the loan servers to agree to sub-prime rate of interest at the original level during the time the occupants continued to reside in the house. The root cause of the people landing up in the foreclosure mess is not that they could not pay the dues but because they failed to meet the increased reset interest rates, that usually doubled. Some payments rose from $800 to $2,600 per month. However the borrowers have to show that they cannot afford this steep rise.

Schwarzenegger has set an example in pioneering this sort of a plan involving the loan servicers. He has cause to be concerned since California is one of the leading foreclosed states. It ranks 7th among 16 metropolises with the highest number of foreclosures. In September this year California recorded 51,259 listings – this being the highest in USA. About 500,000 residents of California are burdened with sub-prime loans that will soon rise to a higher interest notch within the next couple of years. A good number will not be able to bear the rise. Families will be ruined. It will infect the adjoining regions and tell on the general economy. Already during the past months the revenue of the state has fallen. Who will pay the house tax? With the housing market falling so too will taxes.

As a secondary step Schwarzenegger and his group is trying to make the Congress raise government backed loan limits so that more people here can apply for prime loan. Admitting that both sides made mistakes, the governor is confident that this scheme will lessen the agony for all.

Search Images:

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.