California Takes Lead in Pressure to Modify Loans.

Sacramento, CA -- California Gov. Arnold Schwarzenegger has enlisted four major subprime servicers to streamline their loan modification procedures for adjustable-rate subprime mortgages to stem rising foreclosures in his state.

Countrywide Financial Corp., GMAC Residential Holding Corp., Litton Loan Servicing LP and Barclays HomeEq unit have agreed to help borrowers who are facing resets on their 2/28 ARMs and cant afford the higher payments.

The four companies service 25% of the subprime loans in the Golden State and they are expected to freeze the interest rate at the starter rate for eligible borrowers so their payments remain stable and affordable for five to seven years.

Countrywide Financial Corp. intends to adopt a five-year freeze.

Under our program, we anticipate freezing rates at the pre-adjustment level for up to five years for borrowers with good payment records who are likely to have trouble making an adjusted payment, Countrywide spokesman Rick Simon said.

Gov. Schwarzenegger said his state is facing a foreclosure crisis and half a million California borrowers have subprime mortgages that will reset to a higher rate in the next two years.

With this kind of cooperation from loan servicers, we can save tens of thousands of people from being added to the foreclosure lists, he said.