Democrats in the California State legislature are hoping the Governator will agree to a special session dedicated to the foreclosure crisis. The bill they are proposing sounds similar to the recently passed anti-predatory lending bill at the federal level. For example, it proposes that homeowners be able to refinance without prepayment penalties and advocates for additional counseling for consumers as well as more stringent measures regulating to whom lenders can market subprime mortgages.
The bill is being touted more as a preventive measure than an actual “bailout” as those who have already gone through foreclosure or are currently going through it would not be affected. Considering that of the top 10 cities with highest foreclosure rates, 5 are in California, the bill could help stave off lost revenues in our fair state in the billions of dollars. (An estimated $4 billion could be lost in property and associated taxes due to foreclosures). To help consumers, the California Assemby has put together a website called ”Home mortgage crisis: what you need to know“. Included on the website are topics such as “Avoid Foreclosure” “Contact Your Lender” and “Beware of Scams”. (The SF Chronicle also recently published an article on foreclosure scams here.)
Personally I support these types of measures for several reason. One, I know that if I were in financial crisis I would appreciate the option of being able to renegotiate my lending terms. But mainly, beyond my own personal situation, the fact that foreclosures could spell economic havoc statewide is more than enough to persuade me. Who wants to be paying more in state and property taxes for years down the line because we didn’t allow some homeowners to freeze their mortgate rates? It’s not as if their houses will be “given” to them; these folks will still have to pay a mortgage, albeit with a frozen or lower than originally agreed to APR. Finally, not only could individual homeowners and taxpapers across California benefit from a rate freeze, lenders would too since it is likely that they could actually lose more money through the foreclosure process than if they simply froze interest rates.
So dear Redfin readers, what say you? Do you support this type of antidote to our state’s subprime mess?
photo by brokenarts, courtesy of stock.xchng