Prop 201: Homeowners’ Bill of Rights

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Proposition 201 would change the Arizona Constitution to expand rights for homeowners. Hear both sides of the issue with guests Rebecca Friend of the AFL-CIO and Kevin O� Malley of the law firm Gallagher and Kennedy.

Ted Simons:
>>> 8 out of 10 homeowners in serious trouble aren't getting the help they need for banks in negotiating a deal that might keep them in their homes, according to a new report issued by the state foreclosure prevention working group. Earlier, I spoke to Arizona attorney general Terry Goddard about that issue. And Terry Goddard, thank you for joining us on "horizon."

Terry Goddard:
>> Thank you, Ted. It's a pleasure.

Ted Simons:
>> update us, if you can, on efforts to keep homeowners out of foreclosure. How's that going?

Terry Goddard:
>> Well, I wish it was going better. Um, this is something that way predates the current crisis on Wall Street and in congress. A year ago, a group of attorney generals from a wide variety of states around the country met with the 20 largest loan servicing organizations in the United States. Over 80% of all the mortgage loans were represented around the table. And we had a -- I thought we had a consensus from that meeting that there were some win-win agreements out there where the mortgage lenders and their servicers could work much harder with the homeowners who were very distress to try to keep them in their properties. Let me be clear. These aren't the speculators. The people that bought 14 homes and said they lived in every one of them. These are the hard working people trying to live in the home that they are trying to buy. It's so much to the lender's benefit to be able to work something out that we thought we had a general agreement. We've been tracking it. The third report tracking our progress came out today. It was very disappointing it basically said the number of folks in foreclosure is up. Number in some kind of discussions with their loan companies is down. And the number that are going to short sale or foreclosure versus the number that are in some kind of a negotiated workout is significantly changed against the home owners.

Ted Simons:
>> is this for lack of trying on the lender's part? What's going on here?

Terry Goddard:
>> It's hard to say. There was a blip around January where we had an awful lot of these discussions and they've tapered off since. That's something I find very hard to explain because I think enlightened self-interest would carry the day here. The fact that it would cost up to $50,000 to do a foreclosure and resale of a property and there's all kinds of opportunities for slips and losses of money for the lender, so they have a strong incentive to sit down across the table from a borrower who is in default or getting into default but wants to make it happen to work out the loans. Unfortunately, that's not going to happen. They're going to short sale or foreclosure. Here in Arizona, our numbers for august were 14,000 homes either in foreclosure or in pre-foreclosure. That's a tidal wave across the country. Over 300,000 across the United States.

Ted Simons:
>> is there -- quickly without getting too, you know, deep inside baseball here. A loan modification plan that makes sense to you that you're not seeing enough of?

Terry Goddard:
>> We're not seeing decisions from the companies sitting down with the homeowners saying, let's look at your ability to pay and our ability to modify the loan in a way that you can afford it. It won't work for everybody. What we've asked the loan companies to do is put the decision-maker, not some clerk, not just someone who answers the phone and takes messages but someone from the company at the table. That's what we've asked for. That's what we're calling on. We're meeting separately. By we, i mean attorney generals from a number of states meeting with a number of companies to have someone take the lead -- and i think someone will. I'm optimistic about this, to essentially say, our policy to go forward is to favorite home owner and try to get the workouts to happen in three quarters of the time or some percentage that's much higher than we're seeing today. I think it'll be to their advantage. I think they're going to do much better in the marketplace and save money in the long run if they can do that.

Ted Simons:
>> Let's talk about foreclosure fraud. How much are you seeing out there?

Terry Goddard:
>> we're seeing a lot. It's a direct result in the increase in the number of foreclosures and the lack of ability to work with the lending companies. And for them to work with the homeowner because we have here in Arizona many, many people who are desperate. Unfortunately when you're desperate and panicked, sometimes you get into bad deals. There's some fraud artists out there and very unscrupulous people who show up on the doorstep of someone who is in financial trouble their mortgage and says, "We're here to help you. We're here to either keep you in your house or save your credit through a quick sale." Unfortunately, we just brought an indictment against a company called harvest properties in Tucson who had been doing that for sometime who they were make something very unfavorable sales for the homeowner who was in trouble. Another series of indictments from the week before were against companies that were doing what we call foreclosure rescue scams. They basically force the homeowner or trick the homeowner into a sale lease back when they thought they were just doing some kind of an interim loan to be able to stay in their house.

Ted Simons:
>> we talked before a little bit about this. Give us an update, if you will, regarding mortgage fraud and how much that's out there?

Terry Goddard:
>> the flip side of what we saw a lot of, unfortunately, were borrowers who seemed to be tricked into getting more loan than they can afford. Just today, we indicted a woman in scottsdale who were taking advantage of that system perhaps. She was getting loans based upon a financial statement that was purely fraudulent it showed she had way more income than she actually did. She bought houses way beyond her means and quickly managed to refinance them with compliant loan officer who was also indicted. The bottom-line is she sucked $1 million in cash out of six properties. Those immediately go into foreclosure. The crisis that we're dealing with is not just about individual homeowners, it's about greedy speculators who went to the trough and the properties that they were buying are now the ones that are sitting empty. The grass isn't cut. The entire neighborhood's valuation is sinking as a result of these bad deals.

Ted Simons:
>> all right. Well, terry, thank you for joining us. We appreciate it.

Terry Goddard:
>> Thank you. I wish I had better news.

Terry Goddard:Arizona Attorney General

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