On February 25th, Governor Arnold Schwarzenegger signed a bill into law that establishes a 90-day moratorium on many home foreclosures on in California. The bill protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.
Under existing California law, a lender can initiate a foreclosure by recording a notice of default. After the expiration of 90 days, the lender can record a notice of sale. For first mortgages recorded between January 1, 2003 and January 1, 2008, the lender must now wait 180 days before giving notice of a sale date unless the lender or loan servicer has an approved loan modification program in place. The new legislation expires on January 1, 2011.
In January 2009, lenders commenced more than 2800 foreclosures in San Diego County. Like many other legislative proposals, the intent of this legislation is to force lenders and loan servicers to be more reasonable in offering loan modifications to troubled homeowners. However, it is unclear how many of those 2800 foreclosures will be prevented by this legislation.
With the vast array of options available for struggling homeowners, the most important advice is to seek the assistance of a qualified attorney. For some, the best option might be a Chapter 13 bankruptcy to strip an unsecured second mortgage from their home. For others, the best option might be an experienced attorney who specializes in loan modification services. For now, the California legislature has offered homeowners additional time to negotiate and incentives to lenders to cooperate with reasonable modification requests. Whatever you decide to do, hire a professional and don’t go it alone.
Under existing California law, a lender can initiate a foreclosure by recording a notice of default. After the expiration of 90 days, the lender can record a notice of sale. For first mortgages recorded between January 1, 2003 and January 1, 2008, the lender must now wait 180 days before giving notice of a sale date unless the lender or loan servicer has an approved loan modification program in place. The new legislation expires on January 1, 2011.
In January 2009, lenders commenced more than 2800 foreclosures in San Diego County. Like many other legislative proposals, the intent of this legislation is to force lenders and loan servicers to be more reasonable in offering loan modifications to troubled homeowners. However, it is unclear how many of those 2800 foreclosures will be prevented by this legislation.
With the vast array of options available for struggling homeowners, the most important advice is to seek the assistance of a qualified attorney. For some, the best option might be a Chapter 13 bankruptcy to strip an unsecured second mortgage from their home. For others, the best option might be an experienced attorney who specializes in loan modification services. For now, the California legislature has offered homeowners additional time to negotiate and incentives to lenders to cooperate with reasonable modification requests. Whatever you decide to do, hire a professional and don’t go it alone.
About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.
4 comments:
Do you know how they are defining an "approved loan modification program in place"? That sounds like a huge loophole!
Does it mean the lender only must have a modification program such as the Obama Home Affordability plan in general or does it mean an approved loan mod program in place with a borrower?
If you could shed some light on this, it would be helpful.
Thanks for your blog!
The loophole is so big that you could steer a Nimitz-class carrier right through it. Nearly every lender in California has obtained approval for their loan modification program to be exempt from the "moratorium". You can see which lenders are exempt at this link: http://www.corp.ca.gov/FSD/CFP/default.asp.
Here is an article that explains things more thoroughly: http://www3.signonsandiego.com/stories/2009/jun/19/few-homeowners-expected-benefit-foreclosure-law/?uniontrib
I understand the desire to keep people in their homes with the foreclosure moratorium. The unfortunate fallout of this is that there are now NO houses on the market. For someone who was waiting out the insanity of the last five years, is now 30 years old, and STILL can't afford my first home, what about me? What did I do wrong?
Now we are ushering in an era of being rewarded or compensated for being an idiot - a sheep who follows a boom, rather than being a level-headed individual who waits out a frenzy, assured that things will correct themselves. This moratorium has single-handedly ensured things are NOT correcting themselves, but in fact is using taxpayer dollars to reward the irresponsible while those of us waiting our turn are again left out of another bubble - the Ellen Corbett Irresponsible Buyers bubble.
It'll adjust again, I have no doubt. The government has no business in a free market where buyers rolled the dice to all become millionaires off of their houses, used them like a veritable ATM for 10 years, and now get a safety blaket to cry into when the going gets rough.
If the opportunity arises for your senators and congressmen to get involved with the housing market again, kindly urge them to pay attention to other things. They've done enough damage already.
Wes, this legislation had absolutely no impact on foreclosures that I can see. 99% of the lenders got their loan modifications program in place and approved before it ever went into effect.
There are many bank owned properties available. If you are unable to get a home, it is more likely due to lack of a down payment or the tighter lending criteria being used these days.
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