Loan Modification

California Foreclosure Prevention Act goes into effect tomorrow

By Morgan

The state of California is imposing a 90-day moratorium on all foreclosures as part of the new California Foreclosure Prevention Act that goes into effect tomorrow.  The law requires that lenders prove they tried to modify a borrower’s loan before initiating foreclosure proceedings.

From the San Jose Mercury News:

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

But supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.

The highlights of the law are (from California Assembly Member Ted Lieu’s site):

1. Imposes a 90 day foreclosure moratorium to allow distressed homeowners time to work out loan modifications with their lenders.

2. Allows lenders to avoid the moratorium if they have a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation. Loans may be modified several ways, including interest rate reductions, extension of the loan term, or principal reduction.

3. Provides oversight and accountability by requiring regular reports to the legislature on loan modifications and foreclosure reductions, and coordination with appropriate state regulators.

We have some real rocket scientists up in our state legislature.  At least I’m not the only one who thinks this is completely idiotic. From Mish:

This bill is no more likely to work than a bill declaring poverty to be illegal or the sky to be green.

Full post as published by Blown Mortgage on June 15, 2009 (boomark / email).