California’s Governor Seeking Stay on Foreclosures

Arnold Schwarzenegger, the governor of California is seeking legal help to put 90 days stay on all foreclosures.

President elect Obama has also come up with similar suggestions but Schwarzenegger’s plan is slightly different. He is trying to project California as a safe haven for the mortgage lenders, commented an advisor to the governor, David Crane.

If lenders wanted to avoid a stay on foreclosures they would have to show that they have an effective modification alternative for the troubled mortgages. California is one of the worst foreclosure hit states in the country. Schwarzenegger’s plan will affect all regulated lenders whether of the state or the feds in California. Crane added, “We are keenly interested in just keeping people in their homes.”

The 90 days of grace should give enough time to the lenders and borrowers to renegotiate amicable feasible plans that would benefit both parties. Foreclosures weigh heavily on the lenders as regards money and time. This way the loss would be lessened for them. The modification would lead to a lowering of the monthly amount that borrowers would have to remit. Preston DuFauchard of California Department of Corporations gave his opinion on similar lines. The aim is to make lenders work aggressively so that they avoid the stay order that will be enforced by the state.

Schwarzenegger has another part to his plans that aims at preventing future housing bubbles that ultimately lead to foreclosures. More additions will be made to the economic stimulus package and discussions will focus on the increasing deficit budget of the state. The governor is keen to see that the Department of Real Estate and Department of Corporations of California put into force federal laws and controls like Truth in Lending Act to rein in the activities of realtors. He wants a revamping of lending practices for the protection of borrowers. Expanding the duties of the fiduciary duties for mortgage brokers could do this. This will be of benefit to the borrower in the event of a lawsuit. Lenders making false statements would be penalized. The conditions for issuing licenses to mortgage lenders would be made stringent and standard. California would cooperate in setting up a national database enabling the public to check the bad records of loan originators. Borrowers would also be made more financial literate to understand the loan terms before inking contracts.

California would be asking from the federal government a generous portion of $700 billion (TARP) for buying and modifying reo homes.

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