After a severe economic storm of more than 365,000 California foreclosures since early 2007, the state's long-awaited 90-day foreclosure moratorium law goes into effect Monday.

Startting Monday, loan servicers must prove to the state they have comprehensive loan modification programs in place - or be denied rights to foreclose on their own schedules. The new law is supposed to make lenders try harder to keep borrowers in their homes.

The law will largely press lenders to follow the Obama administration's Making Home Affordable Program that began in March. That encourages lenders to cut interest rates or rewrite loans to 40-year terms to get payments below 38 percent of a borrower's monthly income. Other options include reducing principal and tacking missed payments to the back of the loan. Under the law, California officials also can encourage short sales or deeds in lieu - options in which banks accept less than owed - for borrowers who want to leave or don't qualify for modifications.

This is basically how the new law will work:

• Lenders will submit applications to the state outlining their loan modification programs. That gives them a 30-day exemption from a moratorium.

• If the state OKs a lender's program, the firm is permanently exempt from the 90-day delay on foreclosures.

• If the state rejects the program as inadequate, a lender has 30 days to upgrade it and be reconsidered.

Leyes said consumers will be able to see a list of lenders that comply with the state's requirements by mid-July.

To see the full article, click here. 

Share