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- Written by: California Attorney General's Office
LOS ANGELES – Concerned about a "new wave" of foreclosures, Attorney General Edmund G. Brown Jr. today has called on 10 major banks and loan servicers to detail their plans to assist homeowners facing dramatic monthly payment increases on pay option adjustable rate mortgages.
"Homeowners with Pay Option ARMs are sitting on ticking time bombs that the lending industry has the power to defuse," Brown said. "Unless these banks and loan servicers act quickly, hundreds of thousands of mortgages will reset across the state, creating a new wave of foreclosures."
In the third quarter of 2009, California accounted for more than 25 percent of the nation's foreclosure activity, with 250,000 homes receiving foreclosure filings statewide. This is an annual increase of almost 20 percent in foreclosure activity and more foreclosures loom.
California homeowners hold almost 60 percent of the nation's exotic pay option ARMs originated between 2004 and 2008. Approximately one million of these mortgages will reset nationwide in the next four years, resulting in higher payments and a dramatic increase in foreclosures.
Brown believes that the lending industry must be responsive to homeowners and loan modification programs must be expanded.
In October 2008, Brown announced an $8.68 billion settlement with Countrywide Home Loans, once the largest lender in the county, after the company deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers' ability to afford loans.
In total, Brown has sought court orders to shut down more than 30 fraudulent foreclosure assistance companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan modification consultants.
Homeowners who have been scammed can contact the Attorney General's office at 1-800-952-5225, or file a complaint online at: www.ag.ca.gov/consumers/general.php .
For more information on the Brown's action against loan modification fraud visit: http://ag.ca.gov/loanmod .
Brown's request was made in a letter sent to: Bank of America Home Loans & Insurance; Wells Fargo & Company; JP Morgan Chase & Co.; Litton Loan Servicing; ResCap, LLC; Ocwen Financial Corporation; OneWest Bank; American Home Mortgage Servicing; Saxon Mortgage Services, Inc.; and Select Portfolio Servicing. Banks and loan servicers are asked to respond by Nov. 23.
The text of the letter follows.
October 29, 2009
The foreclosure crisis continues to plague California homeowners who are trapped in mortgages with exploding monthly payments. While the economy is beginning to improve, homeowners desperate to save their homes have seen little relief. And analysts predict that foreclosures will continue to worsen, particularly as Pay Option ARMs begin to recast.
Economists estimate that about one million Pay Option ARMs will reset in the next four years, resulting in massive payment shock and dramatically worsening the foreclosure crisis. California, with 58 per cent of all Pay Option ARMs originated between 2004 and 2008, will be the epicenter of this crisis. Systemic plans to modify these loans as they recast must be in place, in order to preserve home ownership and avoid a prolonged and painful recession.
Loan modifications can help many of these borrowers save their homes. To be successful, however, current loan modification programs must expand. The Administration's Home Affordable Modification Program (HAMP) has been slow to get off the ground and will not benefit thousands of Californians threatened by foreclosure, as it does not allow for principal reduction. Yet principal reduction is exactly what borrowers need. Borrowers living in areas with sharp depreciation in housing prices do not have enough equity in their homes to qualify for HAMP. This situation is even more dire for borrowers with Pay Option ARMs, who now owe more on their homes than when they first took out their mortgages.
Poor customer service often is a significant obstacle to effective loan modifications. Homeowners seeking loan modifications continually complain that their lenders and servicers fail to respond to their phone calls; that they are asked to resubmit the same paperwork over and over again; that they are told they will not be considered for a modification unless they are already in default; and that they receive no answer to their request for a loan modification and are left with no option but to short sell their home, go through foreclosure, or file for bankruptcy. Effective customer service systems must be in place to address the next wave of mortgage resets.
The foreclosure crisis and the expected deluge of Pay Option ARM recasts require advance planning on the part of the entire mortgage industry. Given the importance of this issue, we ask that you provide the following information by no later than November 23, 2009:
1. The number of Pay Option ARM loans secured by residential real property
located in California that you are servicing (regardless of whether you own the loans).
2. Of the number of Pay Option ARM loans identified above, the number that have negatively amortized, and the average dollar amount of that negative amortization.
3. A detailed explanation of all efforts you have taken to handle customer service concerns of borrowers with Pay Option ARM loans, including any increased staffing and a description of any notices you send or are planning to send to borrowers whose loans are about to reset. For advance notices sent to borrowers, please specify how far in advance of the reset date you send, or plan to send, those notices.
4. A detailed explanation of the loan modification plans you have developed for Pay Option ARM loans. Please state the circumstances under which your plans allow for the reduction of principal, and the possible amounts of principal reduction. If you are not willing to consider principal reduction as part of your plan, please explain why. Please also specify whether you have already implemented your modification plans for Pay Option ARMs or, if not, the time frame within which you expect to do so.
5. To the extent your approach for considering whether and how to modify Pay Option ARM loans has changed since the beginning of the foreclosure crisis, please explain the changes and the reasons for those changes.
We look forward to receiving the requested information and to productive discussions on how to minimize the impact of Pay Option ARM recasts on California's residents and economy.
Sincerely,
BENJAMIN DIEHL
Deputy Attorney General
For EDMUND G. BROWN JR.
Attorney General
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- Written by: Editor
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- Written by: California Board of Equalization
California gasoline demand rose by 2.2 percent in July compared to the same month of the previous year. Demand for on-road diesel fell a substantial 11.2 percent in July from the same period in 2008.
This is the third month of slight increase in gasoline consumption.
In July 2009, gasoline demand rose 2.2 percent when Californians used 1.284 billion gallons of gasoline compared to 1.257 billion gallons the same month last year.
The average California gasoline price at the pump in July was $2.92 per gallon compared to $4.51 in July 2008, a 35.3 percent decrease from a record high price.
State gasoline consumption had increased 0.45 percent during the second quarter of 2009 – the first quarterly increase in three years. The increased gas consumption means increased gas tax revenues.
Gasoline sold in July generated approximately $310 million in sales tax during that month, an estimated $109 million less than generated last year.
July sales tax revenues from gasoline would have been about $35 million less had not the state portion of the sales and use tax rate increased from 5 percent to 6 percent on April 1.
Diesel fuel sold in California during July totaled 215.77 million gallons compared to last year’s July total of 243.10 million gallons, which is a decline of 11.2 percent.
California diesel prices were $2.73 per gallon in July 2009 down 44.9 percent compared to July 2008 when the average diesel price was $4.97 per gallon.
While the diesel gallons reflected in the July numbers are down 27.3 million gallons, indicating a decline of 11.2 percent, the reduction in consumption is likely to be less.
The actual decline may be closer to 17.7 million gallons, a decline of 7.3 percent, because the July 2009 figures include refunded gallons of 9.6 million gallons. The gallons included in the monthly consumption numbers are always net of audit assessments and refunds. The July 2009 refunds were larger than most and may have skewed the actual amount of decline.
Last month, the BOE reported that diesel consumption in California declined 8.8 percent in the second quarter of 2009. Diesel consumption generally follows economic activity during a recession.
The BOE is able to monitor gallons through tax receipts paid by fuel distributors. Figures for August 2009 are scheduled to be available at the end of November 2009.
All monthly, quarterly, and annual figures can be viewed at: www.boe.ca.gov/sptaxprog/spftrpts.htm .
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- Written by: California Department of Food and Agriculture
CDFA’s Inspection Services Division protects consumers and the marketplace through inspection of fruit, vegetables and eggs as well as through regulation of commercial feed and agricultural inputs (fertilizers and livestock drugs).
Member vacancies are available on the Fertilizer Inspection Advisory Board and the Feed Inspection Advisory Board.
The Fertilizer Inspection Advisory Board makes recommendations to the CDFA secretary on all matters pertaining to the Fertilizing Materials Inspection Program. The program ensures that consumers receive fertilizing materials that are safe and effective and the meet the quality guaranteed by the manufacturer. One public member vacancy is available.
Applicants should not hold a current California Fertilizing Materials License or be a representative of a licensed fertilizer firm.
The Feed Inspection Advisory Board makes recommendations to the CDFA secretary on all matters pertaining to the Feed Inspection Program. The program ensures that feed manufacturers provide a clean and wholesome product to consumers. Four member vacancies are available on the advisory board for commercial feed industry representatives. Applicants should hold a current California Commercial Feed License.
The term of office for advisory board members is three years. Members receive no compensation, but are entitled to payment of necessary traveling expenses in accordance with the rules of the Department of Personnel Administration.
Individuals interested in serving on advisory board should send a resume by Dec. 31 to the California Department of Food and Agriculture, Feed, Fertilizer, Livestock Drugs and Egg Regulatory Services Branch, 1220 ‘N’ Street, Sacramento, CA 95814-5607, Attention: Dr. Asif A. Maan.
For additional information on CDFA’s Inspection Services Division and associated advisory boards, please contact Mr. Dale Rice at (916) 445-0444 or e-mail