November 18, 2008
Governor Arnold Schwarzenegger has announced an aggressive plan to bring down foreclosure rates by proposing changes to the way mortgages are brokered and originated. The suggestions are to be addressed during the special session of the legislature the Governor has called to deal with both a state budget revenue shortfall and stimulating California's economy.
The Governor's plan includes:
• A 90-day stay of the foreclosure processes for each owner-occupied home subject to a first mortgage on which a Notice of Default has been filed.
• A "Safe Harbor" under which lenders will be able to exempt themselves from the 90-day stay procedure under certain circumstances.
• A loan modification model based on a 38% housing debt-to-income ratio so that the modified loan is sustainable for the homeowners and monthly payments can be reduced by 25-30%.
Governor Schwarzenegger also proposes allowing state authorities to enforce federal laws and expanding fiduciary duties for mortgage brokers. He is also supporting requiring pre-counseling interviews for borrowers entering into risky "non-traditional" mortgages.