City leaders ask lenders to sign homeowner loan
Los Angeles Dept. of Consumer
By Maya Strausberg
November 30, 2007
San Francisco government officials yesterday have asked several
major financial institutions to sign an agreement detailing steps
aimed at preventing an increase in foreclosures and mortgage defaults.
Mayor Gavin Newsom said a large number of San Francisco homeowners
who signed on to two-year fixed loans in 2004 and 2005 have seen
their loans mature in 2006 and 2007. He warns that the teaser
rates jump suddenly and ultimately results in people losing their
The agreement put forth asks mortgage lenders to pledge to reinstate
the original interest rate for the remainder of the life of a
homeowner's loan or at least five years for homeowners who have
made timely payments.
The agreement was sent in letter form Monday from Newsom, Assessor-Recorder
Phil Ting, Supervisor Sophie Maxwell, Supervisor Tom Ammiano and
Treasurer Jose Cisneros. The institutions were given until Friday
to sign the agreement.
At the state level yesterday, Gov. Arnold Schwarzenegger announced
a $1.2 million campaign to educate homeowners about options that
can help them avoid losing their homes to foreclosure.
The campaign urges borrowers to work with lenders and nonprofit
housing counselors before foreclosure. The message will be spread
by working with local leaders and organizations like churches
and community groups.
"Our message is that lenders are willing to work with borrowers
on finding a solution. But right now we are seeing homeowners
who are afraid to even talk with lenders," Schwarzenegger
said in a written statement.
"In fact, loan officials have not been able to reach borrowers
in more than half of all foreclosures," he said. "Some
of these homes could have been saved, so seek out a solution now
before it is too late."
Paul Leonard of San Francisco's Center for Responsible Lending
said low standards for obtaining loans has also been an issue.
Leonard and Ting agreed it is a problem when lenders no longer
ask for proof of income.
The proposed agreement asks lenders to originate loans only when
a borrower's ability to repay is fully considered.
The institutions that sign the agreement must also report on
their loss mitigation outcomes to date beginning Friday and, from
then, on a monthly basis.
Maxwell helped create the agreement because of "predatory
lending" that has affected her district of largely low-income
"Homeowners in the southeast part of San Francisco are more
likely to receive riskier, more expensive loans than residents
in other areas of the city," Maxwell said in a prepared statement.
Maxwell is working with a task force that she called a fair lending
working group. Over the next 35 to 40 days, members of the group
will come up with possible solutions to the home loan crisis,
including possible legal action if necessary.
Although Newsom and Ting admitted they don't expect lenders to
be eager about signing the agreement, they said they want the
institutions to realize that loan modifications are cheaper for
them than foreclosures. They also hope the agreement will open
up dialogue between lenders and the city.
The agreement was sent to nine institutions including Bank of
America, Countrywide Financial Corp., Citigroup, Washington Mutual
Inc., HSBC Bank, Patelco Credit Union, Wells Fargo, US Bank and
the California Bankers Association.
The number of Trustee Deeds Upon Sale, the documents recorded
with the Recorder's Office once a foreclosure has occurred, has
increased in San Francisco almost 250 percent from last year,
according to the mayor's office. Although the numbers haven't
been as bad as other cities in the Bay Area, Newsom said what
is occurring in those cities is an indication of what could be
in San Francisco's future.
"What happens in Oakland or Fremont matters greatly to what
happens in San Francisco," he said.
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