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California’s Bank and Government Foreclosures Prevention Plan

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By : John Cutts    99 or more times read
A plan aimed at preventing bank and government foreclosures has been signed into law by California Governor Arnold Schwarzenegger. The plan, which includes a 90-day suspension on bank and government foreclosures, will take effect on May 22 of this year.

The moratorium law requires mortgage lenders to give homeowners extra 90-days from the day of the filing of the default of notice before a non-judicial foreclosures notice of sale can be given by the trustee.

This 90-day additional moratorium on bank and government foreclosures is on top of the three-month waiting period from the day of the filing of default notice to the issuance of notice of sale of foreclosed properties.

In effect, the 90-day law created a waiting period of 6 months, which is hoped will be enough to encourage mortgage lenders to work out a loan modification scheme with their borrowers.

California foreclosures in 2007 were 84,600. The figures increased drastically to 237,200 in 2008 and are projected to surge to 253,600 in 2009.

The California Research Bureau (CRB) estimated that California foreclosures will reach 1.1 million for the period cycle of 2007-2012.

Meanwhile, the moratorium on bank and government foreclosures carries several requirements:

  • It applies only to first lien loans.

  • The loan was taken on residential real property from the start of 2003 to January 1, 2008.

  • The mortgage property should be the primary residence of the borrower at the time that he became delinquent.

  • Only loan servicers that have not carried out a comprehensive loan adjustment program are covered by the moratorium.

  • The delinquent loan was not purchased, serviced or made by a local or state public housing agency.

  • The loan has not been a collateral for securities acquired by any agency.

  • The distressed homeowner has not abandoned or surrendered his home to bank or government foreclosures.

  • The distressed homeowner should have not filed a bankruptcy.

  • The distressed homeowners have not undertaken an agreement with any person, entity or organization whose main business is to advise people who have made the decision to abandon their homes for bank and government foreclosures.

Critics of the law have argued that the 90-day suspension is not effective enough to prevent bank and government foreclosures in California.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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