Consumers Call For California Mortgage Relief

A coalition of California consumer groups sent letters Monday urging six major mortgage lenders to suspend foreclosures on home loans for the next six months and find ways to keep borrowers from losing their homes.If the California mortgage lenders don’t act, hundreds of thousands of Californians who took on risky loans could lose their homes.

That’s according to a letter sent to CEOs of Countrywide Financial Corp., Wells Fargo Home Mortgage, Citigroup Inc., Washington Mutual Inc., Bank of America Corp. and Merrill Lynch.

More than 100 organizations, including legal aid groups, housing counseling services, economic rights advocates and other consumer groups signed off on the letters.

“We are asking the largest home loan lender groups in the state to take leadership so that families can keep their homes and California’s economy won’t suffer,” said Kevin Stein, the associate director of San Francisco-based California Reinvestment Coalition.

A call to the Mortgage Bankers Association, the home mortgage industry’s trade group, was not immediately returned.

California home loan foreclosures have been rising for months as the housing market slowdown has left many borrowers searching for answers.

Unable to qualify for a mortgage refinance or sell their home in this very sluggish market, many homeowners have had little choice but to default.

More than 80,000 homes went into foreclosure in the first quarter in California, or more than double the figure from the year-ago quarter, according to data from RealtyTrac.

Many of the borrowers who have defaulted have had bad credit home loans, a.k.a. subprime mortgages, which in many cases led to higher monthly payments as their interest rates adjusted higher.

Dozens of subprime lenders have gone out of business in recent months as they lost funding and were pressed to buy back defaulted loans.

In California, black and Hispanic neighborhoods were almost four times as likely than white neighborhoods to have borrowers with problem bad credit mortgages, according to a study by Stein’s organization.

Stein said the California mortgage loan industry bears some responsibility for the foreclosure problems because loose underwriting standards helped push many borrowers into loans they couldn’t afford.

“Large profits were made over the last few years on the backs of consumers who got loans that really were not suitable for them,” Stein said. “This is a crisis that is not of the borrowers’ making.”

SOURCE: Tracy Press