California AG Requests Details Of Home Loan Industry Plans To Defuse Pay Option ARM "Ticking Time Bombs"

From the Office of the California Attorney General:

• Concerned about a "new wave" of foreclosures, Attorney General Edmund G. Brown Jr. [...] called on ten major banks and loan servicers to detail their plans to assist homeowners facing dramatic monthly payment increases on Pay Option Adjustable Rate Mortgages.(1) "Homeowners with Pay Option ARMs are sitting on ticking time bombs that the lending industry has the power to defuse," Brown said. "Unless these banks and loan servicers act quickly, hundreds of thousands of mortgages will reset across the state, creating a new wave of foreclosures."

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• California homeowners hold almost 60 percent of the nation's exotic Pay Option ARMs originated between 2004 and 2008. Approximately one million of these mortgages will reset nationwide in the next four years, resulting in higher payments and a dramatic increase in foreclosures.

For the California AG press release, see Brown Calls on Banks and Loan Servicers to Detail Plans to Stem New Wave of Foreclosures.

(1) Brown's request was made in a letter sent to: Bank of America Home Loans & Insurance; Wells Fargo & Company; JP Morgan Chase & Co.; Litton Loan Servicing; ResCap, LLC; Ocwen Financial Corporation; OneWest Bank; American Home Mortgage Servicing; Saxon Mortgage Services, Inc.; and Select Portfolio Servicing. Banks and loan servicers are asked to respond by November 23, 2009.