Arizona Public Radio | Your Source for NPR News
Play Live Radio
Next Up:
Available On Air Stations
State Capitol News

Bankers Beat Back Efforts at Mortgage Relief in AZ

About half of all Arizona mortgages are under water, meaning owners owe more than the property is worth. This proposal was aimed at helping those who continue to make payments rather than simply walk away. It is a bit complex, involving the state using its power of eminent domain to acquire the property, paying the bank the current market value with money from investors who buy state bonds, and giving the lender a no-interest promissory note for the balance. That buys the homeowner some time for the market to recover. But Jim Lundy of the Arizona Bankers Association objected to anything to give lenders even one cent less than they are owed.

"This is a proposed solution that would use the police power of the state to cram down millions of mortgages on hundreds of lenders arbitrarily," Lundy said.

But Phoenix Democrat Debbie McCune Davis said that's better than the current lose-lose situation when homeowners cannot keep up the payments and the bank forecloses, selling the property for less than the balance of the mortgage.

"The homeowner loses their home and they lose their credit. The bank loses money. And the home ends up in the hands of an investor. Is anybody winning?" McCune Davis asked.

In the end there were not enough votes for the plan and it died.  

Related Content
  • By Daniel Kraker, AZ – President Obama unveiled his 75 billion…
  • Nearly a quarter of U.S. homes with mortgages are underwater. But federal budget cuts have sharply reduced the supply of housing counselors who can help distressed homeowners in the nation's hardest hit communities. One Virginia city is demanding — with some success — that banks pick up the tab.
  • Federal regulators have announced a nationwide review of foreclosures by the country's largest banks. The goal is to reach homeowners who've been treated unfairly, or who lost their house when they shouldn't have. Anyone in any stage of foreclosure during 2009 and 2010 is eligible for the review.
  • The multi-billion dollar bank mortgage settlement could have some unanticipated consequences for borrowers in trouble. There will likely be an initial surge of foreclosures. Banks, freed from uncertainty over the investigation, will probably pick up the pace of home seizures. But the foreclosure rate will probably fall over the longer term as banks ease the burden on borrowers through principal reductions.