California
Debt Consolidation
Home foreclosure scandal results
from abusive California debt consolidation
loans to consumers
San Diego, California, June 1,
2007 – Are you a California
homeowner that is burdened with uncontrollable
debt? You’re not alone! Adding to
California’s high living and housing
costs and unbearable income taxes, credit
and high interest rates have many California
homeowners seriously drowning in debt. To
quell the growing financial dilemma of uncontrollable
debt, many California consumers are resorting
to debt consolidation.
For many Californians, the practice of
debt consolidation has been typically achieved
by getting a “debt consolidation”
loan against the equity on their homes,
otherwise known as a “home equity
loan.” A home equity loan could be
a smart choice for a variety of financial
circumstances. It could allow you to consolidate
medical debt, student loans, and high-interest
credit card balances, or to refinance your
mortgage and get cash out for needed home
improvements. It could also give you a lower
interest rate and lower monthly payment.
This benefit will certainly make it easier
for you to manage your finances and pay
your bills each month. But on the other
hand, a California
debt consolidation loan could put your
home at serious risk!
Despite being able to help you to reduce
steep interest rates, keep in mind that
a home equity loan is a “secured”
mortgage loan that is collateralized against
the equity on your home. This is the spare
capital after the current market value of
your home minus the outstanding principal
mortgage balance. Because your home equity
guarantees the repayment of a debt consolidation
loan, if you default on any loan payment,
the mortgage lender will quickly foreclose
and repossess your home to satisfy payment
of the outstanding loan balance.
Besides the negative “security interest”
of a home equity debt consolidation loan,
you must also beware of predatory subprime
mortgage lenders that have given high-risk
debt consolidation loans with increasingly
high-risk loan options and incentives have
victimized many California homeowners. Because
of them, the California housing market has
experienced insurmountable debt consolidation
loan defaults and subsequent record home
foreclosures.
A prime example of loans utilized by predatory
mortgage lending is the “interest-only”
adjustable-rate mortgage (ARM) loan, which
allows the borrower that needs consolidate
debt to pay only interest and avoid paying
down any principal during the initial loan
period. Seeing people falling behind on
their mortgage payments, debt consolidation
companies have enticed them with “interest
only” loans that offer to save them
from foreclosure by refinancing their mortgages
with lower monthly payments. But prior to
taking the loans, the borrowers were unaware
of hidden loan terms that caused them to
repay only the interest each month. Thus,
at the end of the loan term, a balloon payment
was causing borrowers to pay the entire
principal balance or face eviction from
their homes.
One of the most blatant California debt
consolidation lending schemes has been the
use of “payment option" loans.
This type of loan causes borrowers to pay
a variable interest rate based on unpaid
interest being added to the loan principal.
Many "teaser" rate debt consolidation
loans feature an initial rate below 4%.
But after the initial loan period, the interest
substantially increases. People that have
taken these loans have seen their monthly
payments nearly double and inevitably, many
borrowers have been forced into foreclosure.
Also prevalent in the California debt
consolidation marketplace has been the
abusive lending practice of “equity-stripping.”
Seeing income-challenged homeowners had
equity in their homes, unscrupulous lenders
persuaded them to take out debt consolidation
loans despite their financial challenges
and inability to keep up with existing monthly
payments. Some lenders even caused some
of these homeowners to falsify their income
on loan applications to get debt consolidation
loans approved. But as soon as they couldn’t
keep up with the debt consolidation loan’s
monthly payment, the lenders quickly foreclosed
on their homes and slyly stole any remaining
equity that the homeowners had invested
in their homes.
Lax lending has also flooded the California
housing market and has been a primary contributor
to the state’s foreclosure problem.
Looking for huge profits, California mortgage
lenders have carelessly issued debt consolidation
loans to literally any borrower despite
having a questionable credit history. At
a record pace, subprime lenders were approving
higher risk debt consolidation loans to
credit-challenged borrowers based on the
increased value of the borrowers’
homes, banking on a high return on investment
and the assumption that housing prices would
continue to appreciate. What proved to be
a false premise eventually enticed many
borrowers to take out much higher loan amounts
than what they originally intended. But
as the economy tightened with decreasing
housing prices, the variable interest rates
on most California debt consolidation loans
spiked. The unbelievable mortgage increases
have caused many monthly payment-weary California
homeowners to be stuck with unaffordable
debt consolidation ARM loans. Another terrible
contributor have been dwindling housing
prices that have made refinancing options
much more difficult to find even for a borrower
with a good credit history.
As of March 2007, the catastrophic California
debt consolidation lending schemes have
created massive home equity loan defaults
and unprecedented unemployment. This end
has forced many mortgage lenders out of
business and several large mortgage lenders,
such as Century Financial into bankruptcy.
Yet by far, the victim of the subprime mortgage
lending fiasco that has been impacted the
most is the California homeowner. This has
placed hundreds of thousands of Californians
in imminent foreclosure, fractionally the
largest group of an estimated two million
U.S. homeowners that will lose their homes
by 2008.
California’s home foreclosure statistics
are staggering with 7 of the top 25 foreclosure
rates being in California cities. In the
third quarter of 2007, after Nevada (with
1 for every 61 household foreclosures),
California recorded the second-highest foreclosure
rate more than tripling 2006 figures with
1 filing for every 88 households. In northern
California, the city of Stockton had the
highest foreclosure rate in the country.
Stockton had an estimated foreclosure for
every 31 homes. Riverside and San Bernardino
ranked a close third while Sacramento ranked
sixth, Bakersfield, ninth, and Oakland,
10th.
Home equity borrowing has been significantly
devastating to many California homeowners.
Thus, if you are considering a home equity
loan to consolidate your debt, you must
exercise caution or you could end up losing
your home and greatest asset. You should
only consider getting a California debt
consolidation loan after you’ve done
careful research. Here are some valuable
tips:
- NEVER take out a California debt consolidation
loan that depletes all of the hard-earned
equity you invested in your home.
- NEVER let the offer of extra cash or
a lower monthly payment impair your judgment
into getting a California debt consolidation
loan
- DON’T get the loan if your income
cannot bear the monthly payments or potential
future monthly payment increases.
- ONLY sign loan documents that you have
read and understand.
- NEVER be pressured to sign any document,
or be deceived into signing blank documents.
- ALWAYS be aware of all loan terms, clauses,
and conditions of your California debt
consolidation loan agreement.
In closing, ensure to protect yourself
and your property at all times against abusive
lenders. Remember, before you get a debt
consolidation loan, when in doubt, seek
legal or professional advice. Plus debt
settlement is another alternative to consider
in getting you out of the debt trap. A great
debt settlement company is Debt Free League.
In lieu of a California debt consolidation
loan, their unique Debt Liquidation Program
can help you reduce your total debt affordably
and can produce a savings of up to 70% on
your debt’s principal and interest.
About Debt Free League
Debt Free League is a Debt Settlement organization
that works on behalf of consumers and small
businesses to negotiate the settlement of
unsecured debt. Working through key relationships
with creditors, collection agencies, and
collection attorneys throughout the country,
their Debt Liquidation Program has produced
substantial unsecured debt reductions and
a variety of credit improvement benefits
for many clients.
For more information, Contact
Debt Free League’s Web site at www.debtfreeleague.com
Contact:
Sales
sales@DebtFreeLeague.com
(800) 213-9968
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