Dems Want Special Session on Mortgage Crisis

One of every 88 American homes in foreclosure is located in California. KPCC's Julie Small says that Thursday in Sacramento, state Democrats, hoping to avert more foreclosures, announced legislation to ban certain lending practices.

Julie Small: Assembly Speaker Fabian Núñez calls California ground zero for the subprime lending crisis driving home foreclosures.

Fabian Núñez: We're talking about hundreds of thousands of California families that are today in danger of losing their homes. If we think we're in trouble now, let's just wait to see what happens.

Small: Economists say the number of foreclosures in California could double next year. That's why the Democrats want to rein in lending practices, like adjustable-rate mortgages, that they say have contributed to the high foreclosure rate. In those loans, borrowers pay low interest "teaser" payments that can rise dramatically over a couple of years. Democrats want to freeze those loans at the lower rates. The California Association of Mortgage Brokers doesn't support that idea.

Pete Olgivie: Because it will take away options for people to have access to financing.

Small: Mortgage Brokers' president Pete Ogilvie.

Olgivie: Many loans which are brought forth by some groups as inherently wrong have served millions of families and put them in homes and kept them in homes for decades.

Small: Olgivie says regulators should punish and stop lenders who've abused consumers by selling them adjustable-rate mortgages. But, he maintains that other borrowers still want the option of paying that low initial interest rate on their home loans.