Vincent Howard and our team of Irvine foreclosure defense attorneys have been calling on this blog for years for more effective help for mortgage borrowers. So we were pleased to hear that California's Democratic delegation to the House of Representatives made the same demand to President Obama the morning after his State of the Union Speech. According to McClatchy Newspapers, 16 representatives met on Jan. 25 to make their case to the media, calling for the president to use executive power to create more aggressive, more specific relief. They want a meeting with Obama as well as principal reductions and a more sympathetic replacement for the current acting director of the Federal Housing Finance Agency. They also suggested cutting interest payments to zero for homeowners in bankruptcy, so that all of their payments would pay down principal.
Obama called for a new refinance program in his speech, which would be available to more homeowners than the previous refinance programs, but the legislators criticized it as well-meaning but inadequate. The Democrats took turns sharing stories of foreclosures in their districts and the resulting hardships to Californians. Judy Chu of El Monte noted that her district has had a foreclosure rate of 738 percent over a little more than two years; lenders own 12,000 foreclosed homes in the city of Covina. Loretta Sanchez of Anaheim said her brother needed a loan modification after his business line of credit disappeared in a bank failure and he had other business difficulties. She said he was convinced the loan modification would come through for him right up until he received a foreclosure notice.
Republican California House members dismissed the ideas, with Darrell Issa of Vista calling principal reduction "in every way wrong." Dan Lundgren of Sacramento suggested that writing down principal for those in trouble would be unfair to those who stayed out of trouble. The White House was neutral on the subject, saying the president would continue to pursue existing and proposed foreclosure prevention programs, and noting that California has received $2 billion in federal foreclosure aid. The acting FHFA director, Edward DeMarco, has said principal reduction for Fannie Mae and Freddie Mac mortgages could cost the government $100 billion to pay down the mortgages. The Democratic delegation disputed the number, but also warned that failing to intervene could prolong the crisis and the resulting political problems for Obama.
Led by Vincent Howard, our team of Santa Ana foreclosure defense lawyers agrees that principal reductions are an important part of any potential solution. However, we also agree that it will be tricky to get through Congress, given that body's historic lack of enthusiasm for principal reductions and mortgage cramdowns. A few years ago, banking industry interests shot down the idea of allowing cramdowns only for people in bankruptcy. This would of course be a limited group of people, since not everyone wants to take on the severe credit hit and emotional toll of bankruptcy -- but it failed even in a Democratic-controlled Congress. Nonetheless, the idea remains popular because economic studies (including a Fed study) show that it's key to any immediate housing recovery. That's why Vincent Howard and our Cerritos foreclosure defense attorneys continue to favor it.
If you believe you can avoid a foreclosure -- but you know your lender isn't inclined to help --call Howard Law, P.C., to discuss how we can help. You can reach us toll-free at 1-800-872-5925 or send us a message through our website.