It was a long time coming, but now that the 90-day delay period is in play to forestall foreclosures, California homeowners may see light at the end of the tunnel.
June was a busy month in the offices the governor of California with some landmark legislation making its way onto the floor of the house. “Signed into law was an innovative act that will assist California homeowners in keeping homes facing foreclosure,” said Alan Insul, a well-known and respected Los Angeles business and real estate attorney.
Called the California Foreclosure Prevention Act, this legislation’s intention is to ensure affordable loan modifications for homeowners up to their ears in debt and about to lose their house. Governor Schwarzenegger proposed this particular act and it made its way into the state budget in February.
It’s interesting to note the strong “community minded” orientation of this act in addressing the needs of every Californian for a place to call home without fear of losing the core of their existence. “Foreclosures do a great deal of damage economically, not just to the family caught up in that desperate struggle, but to the neighborhood as a whole. Cumulatively speaking, the rate of foreclosures also depresses California’s economy and drastically affects their budget. It is hoped that this step will stabilize the downward spiral in housing, but only time will tell,” indicated Insul.
Without reinventing the wheel, the act bars a lender or mortgage service provider from filing a notice of sale for a further 90 days in addition to the current time limits, unless there’s a comprehensive loan modification program approved by regulators. The emergency regulations to get this act rolling were brought into play in June as well, and they outlined the criteria for the loan program.
The application process states lenders and service providers get a 30-day grace period from the 90-day foreclosure halt when they get a substantially complete application. If the loan modifications are approved, the person applying gets the 90-day foreclosure stay provided they follow the terms of the approved loan program.
Simply put, the loan modification act modifies the borrower’s loan terms by doing such things as changing the principle loan amount, changing the interest rate or amortization schedule, etc; things that get results – like a 38% debt-to-income ratio for the borrower. “The one fly in the ointment is that if the lender proves modifying the loan gives them a bigger loss than foreclosure would, the lender doesn’t have to offer a loan modification,” added Insul.
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