BUSINESS SPOTLIGHT: Legislators mull housing crisis

California Foreclosure News & Information

By Jeremy Oberstein

State lawmakers continued deliberations Tuesday on competing plans that could freeze foreclosure proceedings for up to 120 days.

Besieged by thousands of homeowners at risk of losing their homes and an economy sliding further south, the Legislature convened a special session in November, a time when the Assembly and Senate are usually in recess.

Earlier this month, Gov. Arnold Schwarzenegger proposed extending notice periods for homeowners up to 90 days, followed by a plan from Assemblyman Ted W. Lieu (D-Torrance) two weeks later to freeze proceedings by 120 days.

Both plans would allow distressed homeowners, including thousands in Glendale and Burbank, more time to work out loan modifications with lenders. But some have criticized the proposals for failing to address the root of the problem.

Picture: This bank-owned property at 800 N. Keystone St. in Burbank is on the market. According to a report on Foreclosure.com, 1,337 homes in Burbank and 1,614 homes in Glendale are in various states of foreclosure. (Alex Collins/Leader)

Richard Pittman, housing services coordinator at ByDesign Financial Solutions, a nonprofit housing counseling agency, said the proposals could have negative consequences by simply extending the foreclosure process for homeowners who failed to do enough to stay in their homes.

“In some cases it will buy them time for folks who may be out of work to get them started, and that’s great,” he said. “But people are not necessarily looking at the big picture, and neither is the lender.”

According to a report on Foreclosure.com, 1,337 homes in Burbank and 1,614 in Glendale are in various states of foreclosure.

More than 309,000 homes in California are close to or are already in the process of being foreclosed upon, according to the website, which tracks data nationwide.

The enormity of the situation, aided by a sickly economy and tightening credit market, compelled the Legislature to convene a special session Nov. 5, before the new class of lawmakers is due to be sworn in Saturday.

“We need to have some flexibility and relief to people who are facing imminent foreclosure,” said Assemblyman Paul Krekorian, a Democrat whose district includes Burbank and Glendale. “What I’m going to be concerned about is encouraging lenders who have programs in place without discouraging additional credit from coming onto the market.”

Assembly Speaker Karen Bass tapped Krekorian to serve on the special session’s Banking and Finance Committee, where the proposal will first be debated before the General Assembly is set to chime in.

Krekorian has not publicly supported either proposal, though observers in Sacramento have said Lieu’s plan might not muster enough support in the capital, and there might not be enough time before the end of the special session Wednesday to pass Schwarzenegger’s plan.

The governor’s plan, first proposed Nov. 5, calls for a 90-day stay of foreclosure for each owner-occupied home subject to a first mortgage on which a Notice of Default has already been filed.

His plan also includes a “Safe Harbor” provision under which lenders will be exempt from the 90-day moratorium if they provide evidence they have an aggressive modification program already in place, a tenet inherent in Lieu’s plan as well.

Schwarzenegger also intends to press a statewide outreach campaign, set to include public service announcements where the governor aims to reinforce the importance of contacting lenders, his office said Monday.

The education component might be the most important, said Pittman whose nonprofit organization has seen a 30% jump in clients since last year.

“There’s a huge hunger for education and materials,” he said. “The ignorance level and lack of consumer education is just so vast.”