RESOLUTION NO. _____________

BOARD OF SUPERVISORS, COUNTY OF SAN MATEO, STATE OF CALIFORNIA

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RESOLUTION CALLING UPON MORTGAGE LENDERS AND SERVICERS TO VOLUNTARILY AGREE TO A THREE MONTH SUSPENSION ON FORECLOSURES OF OWNER-OCCUPIED PROPERTIES IN SAN MATEO COUNTY AND TO MAKE EFFORTS DURING THE SUSPENSION PERIOD TO HELP CUSTOMERS AVOID FORECLOSURE AND REMAIN IN THEIR HOMES THROUGH OUTREACH TO THE COMMUNITY AND RENEGOTIATION OF PAYMENT TERMS

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RESOLVED, by the Board of Supervisors of the County of San Mateo, State of California, that

WHEREAS, a home is often an individual’s largest asset and source of future financial security, as well as representative of an individual’s investment in the local community; and;

WHEREAS, mortgage loans should be suitably tailored to the consumer’s income and ability to meet loan repayment terms, and

WHEREAS, in the past few years, high-risk loans were sold aggressively to borrowers in the State of California that were not suitably tailored to the consumer’s income and ability to meet loan repayment terms, and the targets of these loans were often our most vulnerable residents, such as working families in minority communities and the elderly; and

WHEREAS, inappropriate loans, such as subprime mortgage loans, hybrid Adjustable Rate Mortgages, loans negotiated in another language where only English-language loan documents were provided to the borrower, and loans which misstated income, grew rapidly in San Mateo County in the last few years; and

WHEREAS, the Center for Responsible Lending estimated in a December 2006 report that one in five subprime loans will end up in foreclosure; and

WHEREAS, approximately 80% of subprime loans are Adjustable Rate Mortgages (ARMs) for which the interest rate increases after two years and then every six months after; and

WHEREAS, in many cases subprime lenders made ARMs without regard to whether the borrower would be able to afford the payments after the rate increases; and

WHEREAS, subprime lenders made ARMs assuming that homeowners would refinance before the interest rate increased; and

WHEREAS, many homeowners with subprime ARMs have not been able to refinance due to the stagnation or decrease in home values; and

WHEREAS, approximately 70% of subprime loans were refinances for families who had already bought a home; and

WHEREAS, less than half of all subprime loans include taxes and insurance in the monthly payment; and

WHEREAS, many borrowers end up in foreclosure when they have to make a lump sum payment of their taxes and insurance; and

WHEREAS, these subprime loans have led to an increase in foreclosure rates which hurts the families who are losing their homes as well as the neighborhoods where there are a concentration of foreclosed homes; and

WHEREAS, the mortgage industry maintains that their companies lose money on foreclosures and only foreclose as a last resort; and

WHEREAS, most Pooling and Servicing Agreements (PSAs) allow loan servicers to modify loans in order to make them affordable for the homeowner; and

WHEREAS, many homeowners facing foreclosure report that their servicer never offered them an opportunity for loan modification; and

WHEREAS, Freddie Mac reports that half of all foreclosed homeowners never talked with their lender;

NOW THEREFORE, IT IS HEREBY DETERMINED AND ORDERED THEREFORE, that San Mateo County calls on the subprime mortgage lenders and loan servicers in the County to voluntarily agree to a 3 month suspension on foreclosures of owner-occupied properties in San Mateo County; and

BE IT FURTHER RESOLVED, that San Mateo County calls on these lenders and servicers to make every effort during the suspension period to help their customers avoid foreclosure and remain in their homes, including modifying loans by reducing the interest rate and/or the principal to achieve an affordable monthly payment; and

BE IT FURTHER RESOLVED, that San Mateo County calls on these companies to work with San Mateo County and community-based organizations during the suspension period to reach those homeowners who are not communicating with the servicer.

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