OAKLAND, Calif. — As the mortgage foreclosure crisis tightened its grip on California homeowners and threatened to impact the state’s budget, legislative leaders in Sacramento last week announced proposals to address the current crisis and to reform mortgage practices to forestall future crises.
Assembly Speaker Fabian Núñez (D-Los Angeles) joined legislative leaders, including the heads of the Assembly Banking and Finance and Judiciary committees, Nov. 29, in calling on Republican Gov. Arnold Schwarzenegger to convene a special legislative session on the crisis.
The Democratic legislators proposed measures to identify at-risk borrowers and determine what lenders have done to help them, require that mortgages be translated when English is a borrower’s second language, increase counseling to protect and help consumers, and bar incentives for lenders to push subprime loans onto buyers who can’t afford to pay reset interest rates or who would qualify for prime loans.
“We applaud the proposals and feel it’s really important that the Legislature act on them as a priority because so many people stand to lose their homes when interest rates reset in February,” Lindsey Nitta, ACORN’s California legislative director, said in a telephone interview. ACORN (Association of Community Organizations for Reform Now) is also calling for a moratorium on foreclosures until a plan is in place to help people keep their homes.
Nitta said that while ACORN has heard horror stories from people of all racial and income groups, “people of color, women and seniors are targeted” for subprime loans and are often victims of fraud. The mortgage crisis “could result in the biggest loss of assets” to oppressed minority people, she added.
California is one of the top three states for foreclosures, along with Florida and Nevada. Five of the nation’s 10 metropolitan areas most sharply affected by foreclosures are in the state: Stockton, Riverside-San Bernardino, Sacramento, Bakersfield and Oakland. Latino and African American borrowers have been hit especially hard.
The real estate information service RealtyTrac says one out of 88 homes statewide is in foreclosure, while the Center for Responsible Lending predicts that nearly 180,000 of the 827,000 homes with subprime loans made in 2005 and 2006 will be foreclosed.
It is anticipated that rising foreclosures and a declining housing market will contribute to a projected $10 billion deficit in the state’s budget for the coming fiscal year, and will impact counties and cities as well.
At a congressional subcommittee hearing in Los Angeles on Nov. 30 hosted by Rep. Maxine Waters (D-Los Angeles), L.A. Mayor Antonio Villaraigosa said more than 2,700 foreclosures in the city so far this year mark an all-time high. He challenged the banking industry “to be part of the solution,” and called for foreclosed properties to be offered to the city and to nonprofits, to provide affordable housing and benefit the community. Waters challenged lenders to “step up to the plate” or face “a lot of heat from the street.”