SACRAMENTO — In Washington, Sacramento and the Inland Empire -- where 1 of every 43 residences has been subject to foreclosure -- officials Thursday offered money, legislation and ideas to help struggling homeowners stay in their homes and stop what critics charge are predatory lending practices.
Time is running out for finding a fix, said California Assembly Speaker Fabian Nunez (D-Los Angeles). "If you think we are in trouble now, just wait and see what happens," he warned.
Nunez urged Gov. Arnold Schwarzenegger to call a special session of the Legislature to quickly deal with the expanding sub-prime mortgage crisis in California and joined Democratic lawmakers in proposing a package of new consumer protections.
In Washington, the focus was on national solutions. Treasury Secretary Henry M. Paulson Jr. met with banking regulators and lenders to find a way to keep interest rates affordable for at-risk homeowners.
And in the Inland Empire, Schwarzenegger kicked off a $1.2-million education campaign to help borrowers and lenders restructure loans before a home is lost to foreclosure. Over the next four to five years, hundreds of thousands of Californians' mortgage payments are scheduled to jump by hundreds of dollars a month, he warned at a news conference in Riverside.
At the U.S. Treasury Department, Paulson stressed that he wanted to be more aggressive about avoiding foreclosures. "What the secretary has said is that we need a more systematic way to identify those borrowers and reach them faster," said Treasury spokeswoman Jennifer Zuccarelli.
U.S. officials fear that the rising tide of foreclosures could accelerate the decline in home prices, leading to a vicious cycle of deeper losses for borrowers, lenders and investors.
"We think there's progress being made toward finding a balanced approach that will help people stay in their homes without negatively affecting the markets," said William Ruberry, spokesman for the Office of Thrift Supervision, which took part in the Treasury meeting.
Among the ideas that have been floated are encouraging lenders to extend low "teaser" rates on adjustable-rate mortgages to permit borrowers more time to refinance as well as quickly moving borrowers who are up to date on their adjustable-rate mortgages into fixed-rate loans before they go into default.
