California Lawmakers Banning Risky Mortgages As Defaults Soar

Future Planning Financial
Strictly Mortgage

State Assemblyman Ted Lieu is pushing for a bill that requires mortgage lenders to tighten up already strict guidelines to make sure homebuyers can afford their basic monthly bills before qualifying for a mortgage loan.

This bill would also ban certain designer mortgage loans such as the option arm mortgage. The option arm mortgage, also known as the pay option arm, allows borrowers to pay less than the interest that is due by adding the unpaid interest to the balance of the mortgage loan. The bill would also allow some homeowners to refinance their homes without being responsible for any penalties or unnecessary fees.

The new bill may help some homeowners, who have these risky loans, potentially avoid foreclosure. During the fourth quarter of 2007, California’s default notice fillings more than doubled leading to the highest number of defaults in over 15 years.

Even with the emergency rate cut the Feds issued earlier in the week many California’s are not able to take advantage of refinancing their mortgage because of declining home values. If you have an adjustable rate mortgage and have the slightest bit of equity, you are urged to take a look at refinancing options. Mortgage rates are the lowest they have been in over 3 years and the current market trend tends to favor home values continuing to decrease for another year or two.

You can find more resources pertaining to the steps California lawmakers are taking to help homeowners avoid foreclosure at the California Mortgage page of Future Planning Financial. You will also be able to find the latest mortgage rates and local mortgage lenders.