California Foreclosure Prevention Act…

This is important information for California homeowners that may be in danger of losing their home to foreclosure. A 90-day foreclosure moratorium is under way. The law, which went into effect June 15, is designed to get lenders to try harder to keep borrowers in their homes.

California is ground zero in sheer foreclosure numbers up to 90,000 combined default notices, scheduled auctions and bank repossessions are filed every month, more than any other state. The number represents nearly one in three foreclosure filings nationwide.

The moratorium applies to owner-occupied households; first mortgages or deeds of trust; loans recorded between Jan. 1, 2003, and Jan. 1, 2008, and mortgages with no Notice of Default (NOD) recorded against the property.

Under the new law, loan companies have to prove they tried to modify loans of struggling homeowners before they can begin foreclosing. Otherwise, lenders must give homeowners the three-month reprieve before they begin foreclosure.

In California, a loan modification program is defined as one that modifies a borrower’s loan terms by changing the interest rate, amortization schedule, principal loan amount, or other appropriate factors that results in achieving a 38 percent debt-to-income ratio for the borrower.

The California Foreclosure Prevention Act works hand-in-hand with Obama’s administration’s “Making Home Affordable” effort. The federal initiative does, however, have provisions for modifying second mortgages. State law does not. Unfortunately, for some homeowners, the law also comes with many exemptions, including:

• Lenders who have a mortgage modification program in place that meets state requirements for modifications are exempt from the law.
• Lenders who can document that a modification will result in a greater loss than a foreclosure don’t have to apply the moratorium to such loans.
• Loans purchased, serviced, or used as collateral by the California Housing Finance Agency (CalHFA.ca.gov) aren’t qualified for the moratorium.

(Source: LA Times and DeadlineNews.com)