As part of a proposed economic stimulus package, Gov. Schwarzenegger proposed a 90-day freeze on pending foreclosures in California. According to MDA DataQuick, California had 80,000 foreclosures in Q3 2008, so the proposal by Gov. Schwarzenegger is meant to slow down the pace and provide homeowners with more time to find and re-finance with other, more affordable loans. However, as an incentive to provide more affordable loans, lenders can avoid the 90-day freeze under the plan if they proved they were actively rewriting loans so that homeowners could afford to make lower payments and avoid foreclosure.
From a Bay Area perspective, while I applaud the government’s effort to call for a “cooling off” period from the time a homeowner receives a default notice from a bank, in terms of actually staving off foreclosure, the key will be a recovery in bank lending. Lets not forget that a lot of homeowners facing foreclosure in the Bay Area signed up for interest-only loans, which generally carry about a ½ point premium vs. a fully amortized loan these days. So, it all comes down to what type of risk the banks are able / willing to take – if they are willing to creatively work with homeowners to refinance during the 90 day period, great. If not, the 90 day period could simply be delaying the inevitable foreclosure for the homeowner.
Veena Grover | RE/Max Accord, Fremont CA | http://www.FremontHomesTeam.com
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