New Foreclosure Prevention Act For California Now Law
California's new Foreclosure Prevention Act went into effect on May 22, 2009. The object of the exercise is to delay the foreclosure process an additional 90 days, extending the period to a total of 180 days for those who qualify. The object is to provide more time for lenders to work with borrowers to provide loan modifications, turning "non performing assets" into productive loans and keeping borrowers in their homes.
The question is, will it really help or is it just politics as usual? As with so many of these statutes, in order for them to survive the political process little viable substance remains. The end product is narrowly defined and the number of distressed home owners that will benefit is limited.
The 90 day moratorium applies ONLY if:
- The loan in default is in first position (a first, not a second)
- The loan was recorded between January 1, 2003 and January 1, 2008
- The borrower occupied the home as their principal residence at the time the loan became delinquent
- The loan servicer has not implemented a "comprehensive loan modification program
- The loan is not make, purchased or serviced by a California state
•· or local public housing agency authority and he loan is not
collateral for securities purchased by any such agency
- Imposing such a moratorium will not require the loan servicer to violate contractual agreements for investor-owned loans
- The borrower has not surrendered the property, as evidenced by a letter confirming surrender of the delivery of the keys to the lender
- The borrower is not currently in bankruptcy
- The borrower has not contracted with an organization, person or entity whose primary business is advising people who have decided to leave their homes regarding how to extend the foreclosure process and avoid their contractual obligations to mortgages or beneficiaries
It will be next to impossible to find a lender who does not claim to have a "comprehensive loan modification in place." Of course, the lender's definition of a "comprehensive" program may differ slightly from the borrower's definition.
Although contracts between loan servicers and investors are confidential, we assume that a substantial number prohibit the loan servicer from modifying loans.
State legislators are setting up a web site through which lenders can apply for exemption from the moratorium. We expect that site to be busy once it becomes active.
A more extensive review of the statute can be found here:
http://www.cdpe.com/images/fbfiles/files/California_New_Foreclosure_Law.doc
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