California Consumer Groups Request Foreclosure Moratorium
CFC Joins Coalition Calling Upon Home Mortgage Lenders to Halt Accelerating Foreclosures Caused by Predatory Loans
CEOs of Top Six Banks Asked to Protect the Economy, Working Families
Over one hundred fifteen community and consumer organizations called upon six leading mortgage lenders to
stem the statewide tide of home foreclosures resulting from predatory
loans. The lenders are being asked to declare a temporary moratorium
and direct homeowners to financial solutions that will allow them to
keep their homes.
‘California’s foreclosure crisis doesn’t have to destroy the dreams of thousands of California families,’ said Zack Kaldveer, Consumer Federation of California.
‘Many of these consumers were suckered into bad deals by unscupulous
sales tactics. We don’t think its too much to ask that the largest
lenders in the state, with the likewise largest profit margins, to give
families a chance to keep their homes.’
The letters ask the CEOs to halt foreclosures for the next six months
and meet with community-based organizations to design solutions to the
growing foreclosure crisis. California is experiencing record-breaking
foreclosure numbers, with 31,434 foreclosures
in March alone ‘ nearly triple the number of foreclosures in March of
last year, according to Realtytrac. This surge in activity has pushed
the state’s rate of foreclosures to nearly twice the national average,
Excerpts from the letter signed by the Consumer Federation of California:
We write to you as the CEOs of the largest mortgage lenders in
California, asking that you immediately declare a six month moratorium
on foreclosures of all mortgages with pricing that puts homeowners in
danger. You are the leaders of the mortgage industry and we ask you to take a leadership position
as hundreds of thousands of Californians are in danger of losing their
homes. In addition, we seek meetings with each of you this month to
identify key issues and solutions to this crisis.
High risk loans were sold aggressively in our state over the last few years. These loans were not appropriate for many homebuyers and homeowners. These loans include:
‘ Subprime mortgage loans with high rates and fees;
‘ Hybrid Adjustable Rate Mortgages (ARMs) with low teaser rates, followed by
dramatically escalating interest rates;
‘ Option ARM and Interest Only loans;
‘ Fraudulent stated income loans;
‘ Problematic loans made to seniors; and
‘ Loans to non English-speaking borrowers who are given English-only loan
documents with worse terms.
These loans are now pushing a growing number of homeowners towards foreclosure:
‘ Foreclosure filings for California homeowners are up 79% from last year.
‘ 19.4% of loans made in 2006 may end in foreclosure, representing 450,000
potential foreclosures in California.
‘ In California, neighborhoods of color were nearly four times more likely to get
higher cost subprime home loans than non minority neighborhoods.
‘ In 2007, one million loans in the nation are expected to see interest rates reset;
‘ An additional 800,000 loans will experience interest rate resets in 2008.
This crisis will have an increasing impact not only on the state’s homeowners, but on
their neighborhoods, cities, and the state economy as a whole. In 2006, 21 of California’s
26 metro areas suffered housing price declines. Falling home prices will make it
impossible for some borrowers to refinance their loans. The problem of declining home
prices can only worsen as more homes go into foreclosure, fueling a cycle of falling
home values and increasing foreclosures.
The mortgage lending, servicing and investment process is a complex system involving
many entities. Therefore, we are also calling on all other mortgage brokers and lenders,
loan servicers, and Wall Street firms and investors to declare a six month moratorium on
such foreclosures. State and federal regulators have also played a role in this crisis and
must play a role in resolving it.
In order to sort out this crisis and support struggling households, many strategies will
need to be employed, and all industry and government players will need to come to the
table. But California homeowners do not have time to wait. The moratorium will allow
time to identify key approaches that can positively resolve the dire circumstances of
California borrowers who would otherwise lose their homes.
During the period of the moratorium, the following principles should be honored:
‘ No one should lose their home as a result of inappropriate lending.
‘ No lenders, servicers, or investors that have profited from
inappropriate lending should benefit financially from public programs
designed to help borrowers in distress.
‘ Home loan borrowers facing foreclosure should have meaningful access to
counseling and education so they can understand what options they have to
remain in their homes.
‘ A strengthened system of mortgage lending regulation must be implemented to
ensure that Californians do not face a similar crisis in the future.
California homeowners are facing a crisis. Immediate and bold
leadership is needed to keep our hard working families and elders in
their homes. We know you join us in concern for the plight of these
California families and have no desire to foreclose on their
homes. We look forward to your leadership in declaring this moratorium
and to a dialog to remedy key elements of the foreclosure crisis. This
is the only way to save California homeowners and neighborhoods from