Kirk M West's Blog

An exciting new law was put into effect on Monday June 15, 2009. The California Foreclosure Pre­vention Act is a huge victory for homeowners seeking workout solutions. The new Bill is focused on forcing loan servicers that do not have State approved Loan Modification and Short Sale pro­grams to postpone their foreclosure efforts an additional 90 days.

Here are some of the bullet points to consider:

· Under current State foreclosure law, loan servicers must file a “Notice of Default” (NOD) and wait a 90 day redemption period before filing a “Notice of Trustee Sale” (NOT) which sets a date for selling a home. Under the new Act the loan servicer must file the NOD and now wait 180 days before issuing the NOT.

· The new law will remain in effect until January 1, 2011.

· The law applies to 1st mortgage loans taken out between January 1, 2003 to January 1, 2008 on pri­mary residences only.

Loan Servicers can become exempt from having to wait the additional 90 days. They must submit their plans and guidelines for loan modification programs and short sale workout options.

· These programs must be submitted and approved by the appropriate State Commissioner.

· State or Local Government Agency loans and VA loans are automatically exempt from the new law.

· The loan servicers loan modification programs should include provisions for the following:

• Target Debt to Income Ratio of 38%
• Rate reductions - minimum of a 5 year fixed rate
• Principal reduction
• Extend terms to a maximum of 40 years
• Forbearance of principle to the end of the term
• Modifications must serve a long term solution for the homeowner

· A list of exempt loan servicers will be published on a public website.

· Loan Servicers must report the statistics of their loan modification and short sale workouts every 6 months to their respective Commissioner.

There is a provision to protect Loan Servicers as well. If a homeowner is offered a workout solu­tion and they refuse to accept the terms, the servicer may execute their foreclosure rights.