Los Angeles Personal Injury Lawyer - schwarzenegger

Schwarzenegger Unveils Part of California Economic Stimulus Package: 90-Day Freeze on Pending Home Foreclosures

Paul Kiesel — Thu, 06 Nov 2008 14:47:11 GMT

Yesterday, Governor Schwarzenegger proposed a 90-day freeze on pending home foreclosures to provide needed relief to a squeezed California economy and to provide more time for homeowners to seek a loan modification.

This proposal is part of a larger economic stimulus package for the state that he anticipates will be put in front of lawmakers in a special session of the Legislature that is supposed to begin today.

However, the governor's plan for "loan modifications," another component to his economic stimulus plan, would be based on FDIC chairwoman Sheila Bair's approach to rewriting loans at IndyMac, which has had mixed results thus far.

Schwarzenegger's 90-day freeze is fortunately paired with his loan modification tactic, allowing homeowners to seek an FDIC-like loan modification from their lender (based on the FDIC IndyMac blueprint) or seek one on their own (legal representation, loan modification counseling, etc).

Schwarzenegger said, "The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes [. . .] Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy."

Even Assemblyman Ted Lieu (D-Torrance), who has been dubious about the governor's stance on the mortgage crisis for months now, is pleased with this idea. "What the governor has proposed is a good first step [. . .] I'm pleased that the governor recognizes that banks and mortgage are not capable of regulating themselves. California has the responsibility and the obligation of raising the standards."

And California SHOULD raise "the standards" when it comes to attacking the mortgage crisis, considering the State has some of the highest condensed foreclosure areas throughout the country. Leaders of the state Senate agreed that Sacramento needed to do more to help strapped homeowners, but there are still a lot of question marks as to which approach will be the best for everyone involved.

Originally posted at InjuryBoard by Paul Kiesel

California Law Puts the Brakes on Foreclosures... At Least for Now

Paul Kiesel — Fri, 24 Oct 2008 19:05:12 GMT

When a new state law went into effect over the latter part of the summer, California immediately saw a drop in loan default notices, which has also proven to show a drop in foreclosure numbers.

In the second quarter of this year, a record 121,673 default notices were sent out in the State of California. After Senate Bill 1137 went into effect, a law that requires a lender or servicer to contact a delinquent borrower 30 days before filing a notice of default and explore options to avoid foreclosure, the number of default notices fell to 94,240 for the following quarter.

According to today's Los Angeles Times, "Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months."

This is good news. And SB 1137, which was introduced by State Senate President Pro Tem Don Perata (D-Oakland) in hopes of averting foreclosures for many homeowners who had been previously unsuccessful in contacting their lenders while trying to achieve some sort of loan modification, is a good law to give homeowners adequate time to negotiate with their lenders and come to terms with a situation that's a win-win for both sides.

However, the declining foreclosure statistics do not necessarily prove that the end is near per the foreclosure crisis or credit crisis. It just means that all of the adjustable rate loans that were taken out in 2005 and 2006 have had interest rate resets, and caused this "first wave" of foreclosures. There are still hundreds of thousands if not millions of adjustable rate loans from 2007 that will reset in the coming 12-18 months.

Further action needs to be taken in order to mitigate the next wave of default notices and foreclosures. The FDIC's plan has not worked to the extent it could, contrary to media reports, as they have only successfully modified 4,000 loans and all of those loan modifications were made to people who had not been served with a default notice or were not in the foreclosure process.

Shareholders and regulators need to understand where the value is at in this predicament, and squeeze what they can out of a situation that is not favorable. It'd be better to let a homeowner modify his or her loan at 89% of the original principal balance (not the current negative amortized balance) and wait till the market rebounds in three to five years (remember, these cycles of economic prosperity and recessions are "cycles"), subsequently, the home could then be sold at a price that's equitable or more than the modified loan. The homeowner would not get to walk away with any profits unless the remaining original balance (the 11% that was pared off to help the borrower stay in the home) was recovered by the lender, thus, the investor/shareholder would be able to recoup most if not all of their original investment.

This is one idea that would cut through the complications that have been created by the fact that most mortgages from 2004, 2005, 2006 and 2007 were packaged and sold as securities, and the investors in those securities may not want loan workouts to happen. However, it's likely better for everyone involved to work together on stabilizing the housing and credit markets, while making compromises, than to continue to be split on who gets what, leaving many parties involved with nothing.

Originally posted at InjuryBoard by Paul Kiesel

Renters Caught in Foreclosure Trap While Federal Government Idly Watches

Paul Kiesel — Thu, 16 Oct 2008 20:51:32 GMT

Below is an interesting Associated Press story from today on the effects the mortgage crisis has had on renters. I wrote a blog about this back in May which portends the severity of this situation for some of these renters, which continues to grow steadily.

Most importantly is the lack of assistance or help from the government during the mortgage mess for renters, when borrowers and especially lenders have received loan modification assistance (even if lenders have been stubborn to do this) and financial bailout packages. Currently, only California, Illinois and Michigan have any laws in place protecting renters from immediate or an undetermined eviction due to the mortgage fallout, requiring at least 30 day notices be given to the renters. Every other state has its own tenants' rights and laws that precede or likely don't take into account a situation like the mortgage mess.

Pay attention to pragmatic logic at the end of the article. It's a shame execs at AIG get to go on an $86,000 hunting trip, with presumably government money (i.e. taxpayer money), yet that same government can't fund a program assisting renters who were not involved in the subprime/mortgage boom, even though they were part of the collateral damage due to Wall Street's avarice.

From the AP: MIAMI - Tita Mendoza and her husband moved into their Miami Beach condo in June and have been dutifully paying the $1,800 rent on time every month. And yet, they could be evicted any day now.

Last month, the Mendozas were served with court papers notifying them that their landlord was being foreclosed on, meaning the couple could be turned out on the street.

“It’s unbelievable to me that people could be so irresponsible,” said Mendoza, who moved to Miami Beach from Chicago, where the couple had owned a home. “We’re just waiting to see what happens next.”

Across the country, thousands of renters have become innocent victims of the mortgage crisis: They have been forced to move because the owner of the property was in foreclosure. Security deposits have been lost and lives turned upside-down as people scramble to find a new place to live on short notice.

A few states recently passed or proposed laws to protect renters by requiring mortgage holders to provide sufficient notice for tenants living in foreclosed properties. Sheriffs in Illinois and Michigan also have stepped in to help.

“It’s a huge issue, and it’s one that until recently has flown under the radar,” said Danilo Pelletiere, research director at the National Low Income Housing Coalition. “Renters haven’t been addressed by some localities because they have been focusing on homeowners.”

Almost 15 million renters, or 40 percent of all renters, live in single-family homes, townhouses, condos or duplexes, according to Census data. While there are no national figures on foreclosure-related evictions, these types of rental properties have been vulnerable to foreclosure because they tend to be owned by small investors.

According to RealtyTrac, about one-third of the 378,250 properties with valid mailing addresses that were in default or waiting for a foreclosure sale in May were not occupied by the owner. That would indicate they are investment properties or rentals.

Last week, Tom Dart, the sheriff in Chicago’s Cook County, drew the ire of landlords and lenders everywhere when he announced he would no longer send his deputies on court-ordered foreclosure evictions because many of the people being turned out on the street were tenants who had faithfully paid the rent.

On Thursday, Dart announced that his deputies will resume taking part in foreclosure evictions next week, but only with stringent legal safeguards worked out with the courts. Among other things, a bank that is foreclosing on a property must prove it informed all tenants of a state-mandated grace period designed to allow them to look for new housing.

In Michigan, Genesee County Sheriff Robert Pickell put a two-week moratorium into effect Monday on evicting renters living in foreclosed homes.

“My sheriff doesn’t wring his hands and gnash his teeth very long,” said Undersheriff James Gage. “He looks at the situation, sees it’s wrong and takes action.”

And last week, Ohio state Reps. Ted Celeste and Mike Foley, both Democrats, proposed the Ohio Renter’s Protection Act. The law would require landlords to tell potential tenants if the rental property is in foreclosure and notify current tenants of a foreclosure within 30 days of the filing. The bill also calls for 30-day notice to the tenant before a sheriff’s sale. It could reach a vote by the end of the year.

“You want to protect the tenant to the degree that they have some notice, should there be a need to have them leave,” Celeste said.

In July, California Gov. Arnold Schwarzenegger signed a law giving a tenant 60 days to leave a rental housing unit after the property is sold in foreclosure.

Illinois passed a measure in August that calls for 90 days’ notice before an eviction takes place — a law that apparently was not being followed too closely because Dart told a judge that his deputies were often evicting renters who had not been given proper notification.

When it comes to tenant laws and renter’s rights, each state has its own rules, and each state legislature is free to add further protections for tenants.

But there are no state or local laws in Miami to prevent the eviction of the Mendozas. They have asked a real estate agent to start planning for that possibility.

Other states — Indiana, Minnesota, Rhode Island and Washington — considered bills strengthening tenants’ rights in foreclosures, but they apparently died in their legislatures, according to the National Conference of State Legislatures.

In Michigan, a bill was introduced to require landlords to notify tenants at least 30 days before a property is put up for auction. But the measure has been in committee since last December.

Renters can forget help from the federal government, at least for now. The National Low Income Housing Coalition tried to get the government to spend $200 million for relocation assistance for renters who lose their homes to foreclosure, but the request didn’t make it into the big bailout of the financial industry.

Sheila Crowley, the coalition’s president, said she will continue to press the issue: “If we spent $700 billion, can’t we spend a chintzy $200 million?”

Originally posted at InjuryBoard by Paul Kiesel

Governor Schwarzenegger Vetoes Subprime Mortgage Reform Bill

Paul Kiesel — Thu, 02 Oct 2008 15:09:15 GMT

Amidst the frenzy of last week's stock market turbulence, the $700 billion "rescue" package, and the Presidential Debate, Governor Schwarzenegger vetoed a bill last Thursday that would have prevented state-licensed brokers who put borrowers into loans they couldn't afford.

AB 1830 would have gone further than the Federal Reserve's new Truth in Lending Act rules, which were passed when the housing bailout bill was signed by President Bush in July, as it would have cracked down on the excesses that fueled the housing bubble, particularly the chicanery and other insidious tactics made by mortgage brokers and specialized lenders that flooded the market with irresponsibly written loans. Schwarzenegger lauded the motives of the bill, however, he criticized it for overreaching.

Most supporters of AB 1830 were extremely disappointed by the bill's failure. Assemblyman Ted Lieu (D-Torrance) said, "Wall Street won and Main Street lost today when the governor vetoed AB 1830, a comprehensive, bipartisan, subprime mortgage reform bill that would have fixed a dysfunctional system."

Provisions of AB 1830 would have banned loans that allowed subprime borrowers to slip into greater debt over time, and a prohibition on financial incentives that would have enticed mortgage brokers to steer borrowers into more expensive interest rates and/or riskier loans.

Schwarzenegger said in his veto message that the measure would have put state-licensed brokers at a disadvantage when competing with federally chartered banks that made subprime loans.

A disadvantage? Meaning that mortgage brokers would have been less able to mislead consumers into bad loans, or steer them into "creative financial instruments" that aren't in their best interest. That's what got us into this mess to begin with. The free reign that mortgage brokers had in putting together improperly, if not illegally, written loans that do not explicitly state the terms of the loan (this was often the case with option ARM or teaser interest rate loans: they did not state they were negative amortizing loans, a violation of the Truth in Lending Act).

The governor also complained that, "This provision [would] likely lead to increased litigation based on de minimis violations as plaintiffs attorneys will have much to gain and little to lose." However, regardless of what Gov. Schwarzenegger thinks, the California Supreme Court disagrees with him on this point. (i.e. Ketchum v. Moses: Because a prevailing party will receive attorney fees only if the case is successful, there is little or no incentive to pursue nonmeritorious cases.)

The Los Angeles Times editorial board pushed hard for the measure and said that, "[It] sounds like the governor was searching for a pretext, rather than finding legitimate flaws in the bill."

Originally posted at InjuryBoard by Paul Kiesel

California's New Mortgage Rules, Schwarzenegger to Sign After a State Budget is Passed

Paul Kiesel — Wed, 03 Sep 2008 18:17:02 GMT

Below is information, provided by The OC Register, on California State Senate and Assembly bills that have been voted on within the last six weeks. Some have passed, some have not.

A reporter for the OC Register's Mortgage Insider interviewed three consumer groups for a big story on state regulation. Along with the story a key was created to view new and potential state laws (see table below). The “Verdict from consumer groups” is what the three groups told the reporter. They are the California Reinvestment Coalition, the Greenlining Institute, and the Center for Responsible Lending. And in the “Purpose” category is whether the bill focuses on “Aid,” meaning controlling foreclosures or lender failures, or “Prevention,” meaning an attempt to stop bad practices.

California
Bill or regulation	Purpose	Status	What it does	Verdict from consumer groups
SB 1240	Prevention	Will go to Governor	Requires brokers to notify Department of Real Estate (DRE) that they are brokering mortgages and requires them to file annual reports.	Tepid support
SB 1737	Prevention	Will go to Governor	Gives DRE power to ban unscrupulous mortgage brokers from real estate for up to three years.	Tepid support
SB 1137	Aid	Law	Lender or servicer must contact a delinquent borrower 30 days before filing a notice of default and explore options to avoid foreclosure. This is true until January 1, 2013, and applies to loans made from January 1, 2003, to December 31, 2007. It also says renters of foreclosed homes can be evicted in 60 days instead of 30. And it allows cities to fine owners if they don’t maintain foreclosed homes.	Strong support
AB 1830	Prevention	Will go to Governor	On high-cost (subprime) loans made on or after July 1, 2009, it: Limits broker fees. Limits prepayment penalties. Explicitly says the broker has a fiduciary duty to the client — something that exists already in common law. Prohibits negative amortization, or when a borrower makes a very low monthly payment but owes more to the bank as a result. Prohibits false statements to consumers. Creates a $10,000 fine for violating the new rules.	Mixed: Some neutral, some support it.
AB 69	Both	Will go to Governor	Enables the state Department of Corporations to collect information from loan servicers.	Hate it because info on individual lenders/servicers will not be made public.
AB 529	Both	Will go to Governor	With loans fixed for a certain period, requires lender or servicer to notify borrower between 90 and 120 days before the fixed period ends and the payment adjusts.	Unqualified support
Congress and President
HR 3221	Aid	Law	U.S. Treasury can buy stock of or lend to Fannie Mae and Freddie Mac. FHA can insure up to $300 billion in mortgages after lenders write down balance owed by borrower.	Tepid support
Federal Reserve
Regulation Z changes	Prevention	Law	On high-cost (subprime) loans, does three key things … (A) Lenders must ensure borrowers can afford the highest potential payment in the first seven years. (B) Lenders must verify the income and assets of the borrower, so no more ’stated-income’ subprime loans, also known as ‘liars loans.” (C) No more prepayment penalties if the monthly payment can change in the initial four years. In other cases, a prepayment penalty period cannot last for more than two years.	Tepid

Originally posted at InjuryBoard by Paul Kiesel

California's Housing Turns Deadly

Paul Kiesel — Fri, 01 Aug 2008 20:10:25 GMT

As foreclosure rates continue to rise throughout Southern California, now its citizens have to deal with another problem due to the foreclosure crisis: The West Nile virus.

The two, foreclosures and a deadly virus, don't appear to be bedfellows, however, due to so many homes being foreclosed over the last year and the lack of maintenance by the former owner or the bank to keep the properties in decent shape (particularly the maintenance of pools on the property), there has been the highest occurrence/cases of West Nile virus in the Southern California area since it arrived in America back in 1999.

Since its arrival, the virus has infected 2,300 people in the State of California -- 76 cases were fatal. Orange County officials say this summer has been the worst season to date. Last year, officials had only discovered nine birds that had been killed by the virus, and they were also unable to find an infected mosquito. This year, they've found 219 infected birds and 75 infected mosquitoes.

The Economist has an interesting piece on this problem and the article's introduction paints a picture that is becoming a more common ramification of the mortgage meltdown in Southern California.

The empty house, in a middle-class corner of southern California, is two storeys high and boasts a three-car garage. Roses bloom around a kidney-shaped swimming pool, which is green with algae. Bill Bobbitt, a county inspector, dips a ladle into the water and brings up half a dozen wriggling larvae. Mosquitoes, and the West Nile virus that some of them carry, are thriving in California’s plunging property market. (Economist.com, 7/31/08)

Fortunately, the State of California and Governor Schwarzenegger passed a major bill that is designed to help prevent more home foreclosures. The governor signed it into law a few weeks ago.

There is a key provision on the bill that requires lenders to maintain property that is sitting empty after a foreclosure. In effect, the provision will curb lenders from immediately foreclosing on a person's mortgage, and prompt the lender -- or at least give some moderate incentive to the lender -- to work out a deal with the borrower. Since this law has just gone into effect, it'll take some time to see the positive results, however, one of the indicators that it's working -- helping keep Californian's in their homes -- would be fewer occurrences of the West Nile virus... Hopefully.

Originally posted at InjuryBoard by Paul Kiesel

California Senate Passes Key Mortgage Bill

Paul Kiesel — Thu, 03 Jul 2008 17:57:26 GMT

The California Senate passed the first major bill that is designed to help prevent more home foreclosures and it is being sent to the governor. Gov. Schwarzenegger is expected to sign the measure into law.

The bill would require lenders to give homeowners earlier and extensive warning that their home loans were heading in to default. The bill will take effect immediately upon Gov. Schwarzenegger's signature.

The Los Angeles Times reports that a third provision on the bill, that is more important than it might sound, requires lenders to maintain property that is sitting empty after a foreclosure. In effect, the provision will curb lenders from immediately foreclosing on a person's mortgage, and prompt the lender -- or at least give some moderate incentive to the lender -- to work out a deal with the borrower.

Senate President Pro Tem Don Perata (D-Oakland), who authored the bill, said, "SB1137 will make a difference right away [. . .] This legislation is an important piece of the puzzle of how to best protect California homeowners and communities from the fallout from the nation's mortgage crisis," (Los Angeles Times, 7/3/08).

The "Mortgage Default Warning Bill" is an excellent first step by the state Senate to combat the foreclosure crisis that has hit California very hard (one of four states with the most foreclosures over the last year; Arizona, Florida and Nevada are the other three). State Assembly Speaker Karen Bass said that Wednesday's passage of the foreclosure-prevention bill would create momentum to resurrect a handful of related measures that were killed in the Senate two weeks ago. According to Bass, there are "an effective package of bills to submit to the governor in August."

There is one more key bill that might pass as well in August. Assemblyman Ted Lieu (D-Torrance) seeks to prohibit stated-income loans, which allow people to qualify for mortgages without verifying their income or if they'd even be able to make the monthly payments. Also in Lieu's bill is a provision that would ban less-than-interest-only loans or "teaser rate" loans/payments. These loans are essentially negative amortization loans, however, on the TILA disclosure forms, this is not stated; a violation of the Truth in Lending Act.

Originally posted at InjuryBoard by Paul Kiesel