Huge Increase in CA Foreclosures
Hardworking Americans across the country and in California are being stripped of the cornerstone of the American Dream - their homes - because unscrupulous lenders are engaging in unethical, and sometimes illegal, practices.
Statewide, there are nearly 500,000 homeowners currently facing foreclosure. Foreclosures have been on the rise in California and elsewhere, as the subprime mortgage debacle continues to unfold nationally. Subprime mortgage loans are higher-interest-rate loans sold to people with spotty credit records. Eleven percent of all subprime adjustable rate mortgages are past due, and analysts keeping track of it all say it will get worse.
Many of these loans, which became more popular as the housing market peaked over the last two years, were sold with declining underwriting standards and predatory lending practices.Predatory lending includes extending expensive loans whose terms make it tough for the homeowner to pay it off. Another sign of predatory lending is that the loan is marketed to someone who is not looking for one but is eventually persuaded. The loans may exceed the value of the home and are typically targeted at unsophisticated consumers.
Another significant factor that has led to this increase in foreclosures is the rapid in-flux of novice and unscrupulous mortgage originators [e-mail, online and direct mail lenders] during the boom years of 2001-2005. They either did not know what they were doing or chose to be untruthful and took advantage of unsuspecting consumers who were anxious to own homes or refinance their present homes. They made promises that they couldn't keep and often made ungodly amounts of money on each transaction. For example, some borrowers have been charged as much as $30,000 for closing costs. Most of that money ended up in the pocket of the person originating the loan.
Some 85 anti-predatory lending bills were introduced in 30 states this year. A federal bill was introduced in May called the Borrower's Protection Act of 2007, which would make it a fiduciary duty to treat consumers fairly. It would also outline standards for assessing a borrower's ability to repay and holding lenders responsible for overseeing associated brokers and appraisers.
And, last week, Federal Reserve chairman Ben Bernanke said the government is cracking down on unfair and deceptive lending practices. He also said even though foreclosures are spiking, the problem is likely to get worse before it gets better.
So, although, lawmakers are working on legislation, and prosecutors are investigating lenders, homeowners in trouble shouldn't wait to get help. Predatory lending is the path to foreclosure. Foreclosures move fast. So, before it's too late, know your options with your mortgage lender, talk to a lawyer experienced in default and delinquency counseling, and contact your local non-profit housing organization and the U.S. Department of Housing and Urban Development.
