Governor delivers message of hope on housing crisis

STOCKTON — Gov. Arnold Schwarzenegger and U.S. Treasury Secretary Henry M. Paulson Jr. carried a message of hope and help to the epicenter of California's sub-prime mortgage crisis today.

The two held a town hall meeting with about 250 homeowners, foreclosure victims and local government officials in this northern San Joaquin Valley agricultural and port town, which has one of the highest foreclosure rates in the country.

"This crisis is not going to last," the governor said. "It's a bump in the road." He predicted that California's declining home values would turn upward again soon. Meanwhile, he and Paulson touted new state and federal initiatives that would freeze the mortgage monthly payments for homeowners who would otherwise face a big increase.

"Our economy is healthy, Paulson said, but noted, "The biggest risk to the economy right now is the housing slump." He warned that without action, as many as 1.8 million homeowners with adjustable-rate mortgages could face foreclosure in the next two years.

"The problem is going to get much worse unless we can do something about it," he said.

Help cannot come a minute too soon, said Trudy Crawford of Stockton, who attended the town hall session and asked the two officials for assistance.

She moved from the San Francisco Bay Area two years and bought a home in Stockton. She said her mortgage payments were going up at a time at a time when a death in the family had already set her back. She told the crowd that her lender has been no help.

"Where's the help for us. I'm raising two grandchildren," she said.

The governor replied, "I want to find out why your lender can't help you." The room erupted in applause.

Both Paulson and Schwarzenegger have enlisted such giant mortgage holders as Countrywide Financial Corp. to voluntarily offer homeowners the opportunity to temporarily freeze the rates on their adjustable mortgages.

Many of those rates are scheduled to go up early next year, threatening to force people into foreclosure and out of their homes.

The governor and Paulson on Tuesday went "right into the belly of the beast" because "Stockton is one of the hardest-hit places in the country for foreclosures," said Paul Leonard, director of the California office of the Center for Responsible Lending, an advocacy group for borrowers.

Also Tuesday, the Federal Reserve proposed the first-ever rules to ban the kind of lax borrowing standards that put many people in properties they couldn't afford.