CA Mortgage News- California Crisis-How Do We Fix It?
By: Kathryn Davis
California is in a deep dark financial hole with no rope to climb out. Gov. Schwarenegger declared a fiscal emergency recently for our fair state and asked for millions of dollars in aid from Washington. As far as I know no aid has arrived, my take is that Washington doesn’t take us seriously and views California as a privileged state with nothing but movie stars so why would we need money.
California was and continues to be hit hard from the economic and especially the mortgage crisis and has increased taxes, college tuition, cut jobs, cut state workers pay and more to try to decrease its debt. According to CNN.com economists warn that unless there is another federal stimulus states could face more layoffs and for already struggling states like California this could be devastating. More layoffs mean more foreclosure! Duh! This doesn’t help! I have clients who work for the prisons program that is run and funded by the state, their pay has already been cut 20% and could take another 10%. That is a total of 30% cut in pay, for many that is their entire mortgage payment.
There are no mortgage options for unemployed homeowners other than short sale or deed in lieu which still takes a hit on your credit score and there are tons of scams regarding deed in lieu of foreclosures.
Mortgage lenders will NOT grant a loan modification if there is no income, they would rather foreclose. You have to understand that for every loan there is a risk factor. They take a risk of default for every single loan which is how fico scores fit in among job incomes and stability, credit history, location and marital status.
Loan modifications are hard enough to get for people who do have jobs and income who meet the criteria for government loan mods so there is basically no hope if one or more in a household are unemployed. You are a high bad risk if you are in that situation. Approximately 60% of the “successful” loan modifications completed in 2008 re-defaulted on their mortgages. Does that sound like a successful loan mod? No. Part of that percentage is due to the continued layoffs and closed businesses which was unforeseen by the homeowners.
I have said from the beginning of this current economic crisis in 2007 that this is all tied to unemployment not the stock market, that the ultimate factor to the financial crisis will be unemployment.
So to President Obama’s Adminstration we don’t need just green and freeway building jobs, we need all jobs! We need to re-employ our prison guards, nurses, teachers, office assistants, receptionists forest workers, local unemployment assistants and the list goes on. The government needs to stop focusing large chunks of money on a few areas or solutions hoping for a big change. Haven’t they heard that you never put your eggs in one basket!
Spread the money around that is the only way to get out of this mess. Basis highschool economics of supply and demand people!