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Bill Proposing Moratorium on Foreclosures Met Several Oppositions



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By : Leticia Carvalho    99 or more times read
Democratic legislators, in a bid to help troubled homeowners gain time to work on the modifications on their mortgages, are proposing a 120-day moratorium on foreclosures. This was met with several oppositions from various sectors, including the housing and banking industry who finds the proposal too burdensome.

Other legislators are opposing the bill, claiming the proposal could give reasons for homeowners to intentionally default on their mortgages and ride on the modification program for a chance to get lower monthly payments.

In California, the number of foreclosures is increasing daily, with hundreds of default notices issued on a daily basis. Almost all counties are severely affected with Riverside and San Bernardino registering the highest numbers. This prompted Gov. Arnold Schwarzenegger to propose a similar moratorium plan during a special legislative session.

The moratorium would include loans that are being restructured to achieve a payment scheme where amortizations should not go beyond 38 percent of the homeowners’ monthly income flow. Affordable payments could help avert delinquent payments and prevent foreclosure homes.

Bankers and mortgage lenders associations are opposing the moratorium on foreclosures, stating that the requirements for the proposed loan restructuring are too difficult for them to achieve and would put a heavy burden on their part. They pointed out that the current Senate Bill 1137, which requires lenders to communicate first with delinquent homeowners 30 days before issuing a foreclosures notice, is achieving its purpose and actually reducing the number of notices filed.
However, consumer groups are stating that this is just putting a delay to the inevitable and is not providing a concrete solution to the foreclosure crisis. They fear that the number of foreclosed properties would soon rise anew in the coming months as interest rates on higher-cost loans will again reset. Unless the loans are modified and the interest rates controlled, millions will eventually end up losing their homes.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.

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