A law granting a 90-day foreclosure moratorium has been signed by California Governor Arnold Schwarzenegger.
The law covers foreclosure properties still occupied by their owners who have taken out the original loans between the start of 2003 until January 1, 2008.
Senator Ellen Corbett explained that the law, whom she introduced as part of California’s budget package, is intended to help homeowners who are on the brink of losing their properties to foreclosure.
However, consumer advocates have criticized the law saying that there are unclear provisions that may drag the process of reducing the number of repossessed homes in California.
Under the California foreclosure moratorium law, regulators are given the authority to grant exemptions to loan servicers if they have existing mortgage modification programs that meet some criteria combinations, such as low interest rates for not less than five years, expansion of loan terms and deferment of a part of the loan principal.
Joe Ridout of the Consumer Action argued that it is impossible to defer $1,000 from the principal loan for 30 years.
To be eligible for exemption under the foreclosure moratorium law, a lender’s loan modification program should include a monthly mortgage payment adjustment of not less than 38 percent of distressed homeowners’ income.
Consumer advocates argued that the exemption rule is inferior compared to other federal programs, including President Barack Obama’s Homeowner Affordability and Stability Plan which seeks to reduce payments to about 31 percent of the homeowner’s income.
Meanwhile, California Reinvestment Coalition associate director Kevin Stein said that the law is a regression from the progress that has been made by foreclosure prevention efforts.
He pointed that there is a significant difference between granting loan workouts and having a loan modification program, adding that the law does not seem to cater to the former and will not help reduce the number of repossessed homes in the state.
On the other hand, the California Mortgage Bankers Association, the California Bankers Association and other financial services organizations have written a letter opposing the foreclosure moratorium law.
According to the bankers, the foreclosure moratorium law will only cause uncertainty, restrict home sales and delay economic recovery.
On her part, Corbett defended her law by saying that she was restricted from introducing a more aggressive law by federal banking rules.
Author Resource:-
John Cutts has been educated in the finer points of the foreclosures market over 5 years. Read the latest foreclosure listings news at ListingsForeclosures.com.
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