Today marks the start of a 90 day 90-day moratorium on all foreclosures in California according to the new California Foreclosure Prevention Act that goes into effect today.
According to the law, lenders can’t foreclose on any home in California until the lender is able to prove that they have actively tried to help the homeowner stay in their home by modifying their loan.
According to 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.
Will this foreclosure moratorium on Foreclosures in California work? Will it help more people stay in their home? Only time will tell for sure, but it seems that it may just be delaying the pain of the economic cycle for another 90 days.
The main method of foreclosure in California involves what is known as non-judicial foreclosure that does not involve court action because at closing, borrowers sign a deed of trust with something called a “power of sale” clause, which allows the trustee to sell the property in order to satisfy the underlying defaulted loan.
Since the California Foreclosure Prevention Act was passed and signed in February, now that the law is in effect, it makes loan servicers prove to the state they have comprehensive loan modification programs in place – or be denied rights to foreclose on their own schedules.
On a related note, the California Mortgage Bankers Association reports that after July 1st for the most part it will be illegal to operate as a mortgage foreclosure consultant in California “unless the foreclosure consultant has obtained from the Department of Justice a Certificate of Registration as a Mortgage Foreclosure Consultant.”
Anyone who wants to be a foreclosure consultant must provide all required documents to the Department of Justice – and by July 1, all foreclosure consultants must be registered with the State.
