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President Barack Obama, flanked by Vice President Joe Biden (L) and Speaker of the House John Boehner (R-OH) delivers his State of the Union address on January 24, 2012 in Washington, DC.
The morning after the State of the Union address, more than two-dozen House Democrats from California called on President Barack Obama to do more to help homeowners facing foreclosure in the hard-hit Golden State.
In his address to the nation, Obama said “responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief.” Obama said that's why he's sending Congress a plan "that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks."
Congresswoman Zoe Lofgren of San Jose said the president gave a terrific speech. Her Democratic colleague Judy Chu of El Monte said, "It isn’t enough." She said mortgage lenders own 12,000 homes in her district. "In one ZIP code in a city in my district, Covina, the rate of foreclosure was 738 percent in just over two years."
Lofgren, Chu and other California Democrats in the House have signed a letter to Obama that, once again, asks for his help in fighting foreclosures. They complain the administration’s housing point person hasn’t even met a homeowner facing foreclosure.
That’s not the case for lawmakers. Member after member told stories about constituents turning to them as their place of last resort to try to save their homes.
For Congresswoman Loretta Sanchez of Anaheim, the story was personal. She said she lives next door to her brother, whose business was in trouble. So was his bank.
"His bank went under on a Friday," Sanchez said. "By Monday, the credit line my brother had for his business was taken over by vultures, bought up."
He lost his business, couldn’t make his house payments and entered the Neverland of loan modification. Sanchez said, "Every Friday, I would go home and the first thing I’d do is go over next door and sit down with a cup of coffee at my brother’s kitchen table and say, 'What’s going on with the loan mod?'” Sanchez said that until the foreclosure notice went up on the house, her brother was convinced the bank was going to work with him.
Congresswoman Zoe Lofgren said a quarter of the country’s home foreclosures are in California. "And with homeowners underwater, we expect fully a new wave of foreclosures to hit California."
Democrats have proposed a five-year cut in interest rates for homeowners in bankruptcy so their entire monthly payment would go to pay down their mortgage principal.
Republican Congressman Dan Lungren said that’s a novel idea he’d be happy to consider. He’s from the Sacramento area, one of the nation’s foreclosure capitals.
But Lungren said there is a challenge: "How do you make it fair to everybody involved? You’ve got two people sitting side by side, purchased the house for the same amount. One has drawn down on their overall principle over time, the person next door has not done that because they made other decisions which seemed reasonable at the time. Does the one who does not find himself or herself underwater think it’s fair for the other person?"
Republican Congressman Darrell Issa of Temecula dismisses the proposal outright, saying reduction in principal is "in every way wrong." Issa has been pushing a proposal to bring loan guarantors Fannie Mae and Freddie Mac into the picture to make it easier for everyone to refinance. "Freddie and Fannie will underwrite the refinancing at full principal but at today’s lower interest rates."
A White House spokesman said the president will keep up foreclosure prevention programs and refinancing efforts to “help responsible homeowners stay in their homes.” An administration official said the federal government has already sent California $2 billion to help unemployed homeowners pay mortgages. The White House had no comment on the Democratic proposal for a reduction of principal.