Schwarzenegger backs mortgage default warning bill

SAN FRANCISCO (Reuters) - Amid a surge in foreclosures in California, Gov. Arnold Schwarzenegger threw his support behind a bill on Wednesday that would require mortgage lenders to give a 30-day notice to borrowers falling behind on payments before filing default notices.

The bill by State Senate President pro Tem Don Perata would also provide tenants of foreclosed properties at least 60 days notice to allow them to move and require holders of foreclosed properties to maintain them.

"We need many tools to help Californians through this housing crisis, and this bipartisan legislation provides one more tool by giving borrowers the critical time needed before a foreclosure begins to work with their lenders and stay in their homes," Schwarzenegger said in a statement.

California's foreclosure levels have spiked, especially in inland areas where home purchases during the housing boom earlier in the decade were routinely financed with risky mortgages involving adjustable interest rates.

When grace periods of low "teaser" rates expired, interest rates on the loans jumped, making monthly mortgage payments too expensive for many borrowers.

Falling home prices have also fueled foreclosures by shutting off refinancing options for borrowers burdened by rising mortgage payments.

Separately, California's Department of Corporations released findings of a survey of its licensed mortgage industry companies showing modifications and forbearance plans for shaky mortgages are on the rise.

(Reporting by Jim Christie; Editing by Dan Grebler)