"A lot of people are scared"

Jim Wasserman in the Sacramento Bee:

Throughout 2007, borrowers in trouble with lenders have called here, written for help and cried in conversations about their desperate straits. For a newspaper, it's become a gut reality check, a window into this tough time of reckoning.
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For some it's been easy, in e-mails or reader forums, to rip borrowers for overreaching, for not reading the fine print and for being completely irresponsible. Some were. But assigning blame can't mask the hurt out there. What we know for sure is what we hear on the phone, almost daily now. Well over two years after the housing boom ran out of steam, a lot of people are scared. People are fighting over money and horrified at how unutterably wrong their decisions to buy turned out to be. Story after story tells about their inability to sell or refinance to escape the nightmare.

From the Sacramento Bee:

Assembly Speaker Fabian Núñez said Thursday that the crisis in subprime mortgages has become so grave that Gov. Arnold Schwarzenegger should call a special session to deal with it.
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In an illustration of the complexity of the crisis, though, one of the homeowners presented at the press conference as a victim said the house he lost was actually one of two that he owned. While many owners have lost homes they occupied, others were investors who saw the real estate run-up of the past decade as an investment opportunity.

Sacramento resident Carlos Villegas said he was forced into foreclosure when monthly payments on the house he bought in 2005 shot up from $2,200 to $3,550. "They gave me three days to move," he said. "I feel frustrated with the system.

In response to questions from reporters, Villegas said after the foreclosure, he moved back to a smaller house he had purchased 10 years earlier, which he had been renting out. Villegas took out an adjustable rate equity loan on his first house shortly before he bought the second, more expensive one for $385,000 in 2005, according to property records.

Afterward, Núñez's office pointed out that Villegas lost a substantial amount because of the foreclosure, including college savings for his children, and had to displace tenants who had been living in his first house.

From the Sacramento Bee:

Not everyone believes that Gov. Arnold Schwarzenegger's pact with mortgage lenders to help troubled subprime borrowers will dampen the impact of California's foreclosure crisis.
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[S]ome doubt that freezing subprime loan rates for those who can't afford higher payments will make a dent. Thousands of 2006's subprime borrowers are already defaulting before their loans reset, said economist Chris Thornberg, head of Los Angeles-based Beacon Economics. "It's not the mortgage that's the problem," he said. "A lot of people bought houses they just can't afford."

Thornberg said there really isn't much anyone can do. Falling home values are aggravating a foreclosure problem that's likely to worsen, he said. Values will fall, he said, until most people can afford homes again.

Jeff Tarbell, managing partner of Sacramento-based Comstock Mortgage, also doesn't see much practical impact from the governor's announcement. Tarbell said it takes time to verify that a subprime borrower can't make higher payments – and lenders don't have the staff. Tarbell wants a freeze on rate resets – at least temporarily – across the country to allow the real estate market to stabilize. "We've got to stop the pricing decline," he said.

From the Sacramento Business Journal:

The Sacramento mortgage loan officer who purchased Dunmore Homes -- which in 2004 posted a quarter-billion dollars in revenue -- paid $500 for the troubled builder, according to Dunmore's bankruptcy case. That bargain-basement price has one of the company's major lenders crying fraud, and suing for payment of its outstanding loans and punitive damages.