Several states announced this week plans to aid homeowners facing foreclosure.
According to RealityTrac, an on-line foreclosure tracking site, judicial foreclosures in the Land of Lincoln in 2007 totaled just under 100,000, a 25% increase from 2006 and a 94% increase from 2005. (Illinois ranks in the top ten states for home mortgage foreclosures). Gov. George Blagojevich described Illinois' home foreclosure situation as an "epidemic." (A tad hyperbolic, Gov. B? Mortgage default, unlike, say, HIV, is neither contagious nor epidemic). Homeowners considering their options are invited to take a dip in a "Homeowners Assistance Pool" funded with a $200 million initial commitment from four of the largest mortgage lenders in Illinois. Borrowers who qualify can swap their high interest loans for 30 year fixed-rate mortgages with rates between 5.75 and 8%. (Today's rate for a 30 year fixed mortgage is between 5.76 and 5.92). So who's likely to jump in? Governor B said applicants would have to carry a minimum credit score of 580. Hey, no running on the pool deck! Qualifed pool borrowers will be required to participate in a mortgage counseling program.
The Wolverine State points the finger of blame (and regulation)at retail loan initiators. The Michigan House passed legislation that subjects loan officers to background checks and requires them to register with the state. If you call yourself a "loan officer" in Michigan, you either comply with the new regulation or face penalties of $15,000, one year in jail, or both. So, "hey baby, I'm a loan officer" is out as a pick-up line in Ann Arbor.
The Evergreen State is offering free therapy for home mortgage borrowers facing foreclosure. Earlier this week Gov. Christine Gregoire signed legislation that provides $1.5 million in state funds for financial counseling for borrowers in trouble and consumer education programs for potential homebuyers. So, Washington taxpayers, how does that make you feel?
The Golden State is going straight to the last phase of therapy-- forgiveness. A bill to conform California state tax law to federal law by allowing taxpayers to exclude forgiven mortgage debt from their taxable incomes breezed through the Senate Revenue and Taxation Committee yesterday. If it passes, one source estimates the bill will result in revenue losses of $5 million in fiscal year 2007-08, $7 million in 2008-09, and $1 million in 2009-10. About 8,300 taxpayers would benefit from the measure. The bill's sponsor, Sen. Mike Machado (D) described the bill as "something the legislature can do to help mitigate the pain that the mortgage crisis is causing." Percodan works for pain, I'm told. This kind of pain relief just spreads the pain around.