Governor Continues to Lead on Subprime Mortgage Crisis

Governor Schwarzenegger continues to lead in helping Californians affected by subprime mortgages to avoid bankruptcy.

From the Governor's communications shop:

Today in Oakland, Governor Schwarzenegger will announce a new fund to help local homeowners who are facing foreclosure keep their homes and highlight the steps that foundations, non-profits and banks statewide can take to help their communities preserve homeownership.

At 10:30 am the Governor's remarks will be webcast live at www.gov.ca.gov. For more information on the Governor's actions on foreclosure prevention visit: www.gov.ca.gov/issue/foreclosure-prevention.

For more consumer home mortgage information visit: www.yourhome.ca.gov or www.sucasa.ca.gov.

Californians must attack the threat of widespread foreclosures on every front. Foundations can play a key role in preserving homeownership across the Golden State.

The OneCalifornia Foundation shows how the private sector can foster real, positive change in the face of the mortgage crisis. The OneCalifornia Foundation Bridge Loan Fund will be administered by the OneCalifornia Foundation. The initial contribution of $1 million for the fund was donated by founders Kat Taylor and Tom Steyer.

The foundation is associated with One California Bank, which is located in and serves Oakland, a community that has the tenth highest foreclosure rate in the nation. The foundation will initially focus on helping Oakland homeowners.

Foundations can help those who don't qualify for other protections. The "fast track" principles negotiated by Governor Schwarzenegger and the freeze on some sub-prime loans arranged by President Bush are two critical steps in the fight to stop the foreclosure spiral threatening America. But many homeowners don't qualify for the rate freeze because, for example, they have a different type of loan, or their loan resets outside of the allowable time period. The OneCalifornia Foundation fund will focus on helping these homeowners.

Clear guidelines and financial literacy help ensure that responsible homeowners succeed. Like the state and federal governments, the OneCalifornia Foundation Bridge Loan Fund has guidelines and standards for participants. Under the foundation's terms, homeowners must reside in Oakland, have a stable income, no bankruptcies and live in their homes in addition to meeting other requirements. They must also attend financial planning classes and develop long-term savings and financial plans in order to qualify for assistance.

Foreclosures hurt more than just homeowners. Our economic strength as a state and nation depend on foundations, non-profits, businesses and government to take action.
U.S. Treasury Secretary - Housing Market Is "Biggest Challenge" To U.S. Economy: "The housing market downturn is the biggest challenge to our economy. When home foreclosures spike, the damage is not limited only to those who lose their homes. Homes in foreclosure can pose costs for whole neighborhoods, as crime goes up and property values decline. Avoiding preventable foreclosures, then, is in the interest of all homeowners." (U.S. Department of Treasury, "Remarks by Secretary Paulson on Actions Taken and Actions Needed in U.S. Mortgage Markets at the Office of Thrift Supervision National Housing Forum," Speech, 12/3/07)

Action is especially critical in California.

Almost one quarter of the nation's foreclosure filings are in California. Seven of the top sixteen metropolitan areas with the highest rates of foreclosures in the nation are in California.
Foreclosure rates in California are skyrocketing. The foreclosure rate in California increased more than 35 percent in the last quarter and increased almost 250 percent from September 2006 to September 2007.

Foreclosures bring property values down across California. A recent U.S. Senate Joint Economic Committee report estimates that more than $23.6 billion will be lost in property value over the next two years because of foreclosures in California.

More foreclosures mean less money for schools, public safety and other key services. Over the next two years, it is estimated that California will lose nearly $111 million in tax revenue from forecasted foreclosures and the spillover effect on neighboring properties.

Governor Schwarzenegger is engaging banks, homeowners and the public and private sectors to prevent a mortgage crisis.

Last month, Governor Schwarzenegger worked with loan servicers from Countrywide, GMAC, Litton and HomEq to agree to streamline "fast-track" procedures to help keep more subprime borrowers in their homes.

Last week, the Governor launched a public awareness campaign to educate homeowners about services that can help them avoid losing their homes to foreclosure.

This year, Governor Schwarzenegger signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities. The Governor has also pledged to work with lawmakers in the coming year to take additional steps to protect homebuyers.

Earlier this year, the Governor directed his Cabinet to form the Interdepartmental Task Force on Non-Traditional Mortgages. California was one of the first states in the nation to form a task force to examine the alarming developments in the non-traditional mortgage market.

In September, the Governor made $1.16 million in Community Development Block Grant funds available to counties for consumer counseling and urged Congress to provide more funding for these programs in California.

He will continue to lobby Congress to raise federal loan limits so that more California families can take advantage of these secure products.