California foreclosure moratorium

The mortgage foreclosure bill, which was introduced by Sen. Ellen Corbett, D-San Leandro, was part of the California budget package. The moratorium will cover owner-occupied homes where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.

Under the recently passed law, which has gone into effect in June (more), state regulators can grant loan servicers exemptions on the foreclosure process, and allowing them to foreclose, if the lenders has a mortgage modification program in place that meets some combination of various assistance and other criteria. Among those that qualify are a deferral of a portion of the principal and also lowered interest rates for at least five years or an extension of loan terms.

In order to earn an exemption to the new 90 day moratorium, a lender's modification program needs to include an adjustment in monthly mortgage payments "targeted" at 38 percent of a borrower's income. That's a looser standard than those that have already put forward in several federal programs, including the recently announced Homeowner Affordability and Stability Plan that was announced by the Obama Administration last week. That assistance plan sought to lower mortgage payments to 31 percent of income.

Ensure you have a moratorium in place

To ensure you receive this moratorium, you need to work with your mortgage service and ask them about the program. You can also decide or contact a California HUD approved housing counseling agency.

It needs to also be noted that having a mortgage loan modification program and actually granting loan workouts are two different things for lenders, the law doesn't appear to speak to the latter of actually granting modifications.

Many people think that struggling homeowners and their lenders already have more than enough time to search for mutual solutions to help stop a foreclosure, and a moratorium is not needed. A California state law passed last year increased the required period from first notification to final sale of a families home by 30 days, to a total of 141. However, there is no downside to increasing the timeframe involved.

This new California mortgage foreclosure moratorium will go into effect in late May 2009.





By Jon McNamara

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