California puts 90-day hold on foreclosures

California is imposing a 90-day moratorium on housing foreclosures under a new law that took effect Monday.

The California Foreclosure Prevention Act, or Assembly Bill X2 7, which Governor Arnold Schwarzenegger signed in foreclosureFebruary, is meant to push banks and loan servicers into lowering mortgage payments of homeowners in financial trouble.  Lenders must prove they tried to modify the delinquent loans before they can begin foreclosing.  The California program reflects a similar to the Obama administration’s Making Home Affordable program that began in March.

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.

While the latest moratorium is an effort by lawmakers to slow the tide and give homeowners every possible means of saving their home, it is important to remember: this does NOT immediately stop foreclosures

  • The guidelines concerning this new policy are as follows:
  • The loan was recorded between Jan. 1, 2003 to Jan. 1, 2008;
  • The loan is the first mortgage or deed of trust;
  • The borrower occupies the property as their principal residence when the loan becomes delinquent; and,
  • The Notice of Default (NOD) has been recorded on the property.
  • This policy does not apply to lenders who have already complied with an existing mortgage modification program which meets national guidelines, homeowners who have already surrendered the property, filed bankruptcy, or contracted with another organization to avoid foreclosure.

Lenders and loan servicers that already have a comprehensive and systematic loan modification program in place are exempt from the law. Such programs call for loans to be modified by lowering interest rates for at least five years, deferring or reducing part of the principal, or providing up to 40 years to repay the loan.

For more information go to the California Department of Corporations site where the official regulations spelling out the program are listed in detail.

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