Legal Loan Relief
California Homeowners Can Stop Foreclosure with Loan Modifications, Forensic Loan Audits and Negotiated Mortgage Loan Modification Terms.

01 Jun 09 California Loan Modification & Mortgage Relief Law Updates

In November 2007, Gov. Arnold Schwarzenegger and several mortgage lenders announced a voluntary agreement meant to encourage loan modifications for borrowers facing foreclosure. Mortgage relief remains a top priority for legislators from the State of California.

SB 1137: Created a 30-day waiting period before lenders could file a notice of default; required lenders to maintain foreclosed properties; notification for renters in foreclosed properties.

AB/SB 7 (Second Extraordinary Session): Enacts a 90-day foreclosure moratorium, except for mortgage lenders and loan servicers that have entered into a loan modification program.

Local Lenders from Wells Fargo and Bank of America have reported a surge in FHA mortgage refinance applications and new home purchase inquiries for short sale and bank owner REO properties.

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07 Nov 08 Schwarzenegger Proposes a Plan to Attract Mortgage Lenders to Modify Home Mortgages

California Governor, Arnold Schwarzenegger proposed a new plan to attract mortgage lenders to modify home mortgages to help homeowners prevent foreclosure. The proposal must be approved by the Legislature, which the governor plans to call into special session to consider an economic stimulus package including the foreclosure plan to provide loan work-outs and mortgage relief. “The single most powerful action our state can take to shore up its economy is to help California homeowners remain in their houses,” the governor said in a statement. “Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy.”

Schwarzenegger suggests imposing a 90-day stay for the foreclosure process for owner-occupied homes that have received notices of default. Home lending companies could be exempted from the stay by proving they have an “aggressive modification program” to keep borrowers in their homes. The loan modifications would be structures on the model used by the FDIC to help borrowers of the IndyMac Bank that went bankrupt earlier this year. New monthly payments would have to be 38 % of borrowers’ incomes. To reach that level, lenders could reduce the interest rate, increase the loan length up to 40 years and/or defer some of the principal balance until the home is sold or refinanced. The governor’s office said such mortgage modifications could reduce payments by 25 to 30 %.

State officials said the program might help about half of California households facing foreclosure. Why would being exempted from the 90-day stay motivate lenders to participate? “The time value of money creates a really strong incentive,” said Preston DuFauchard, director of the California Department of Corporations, in a conference call with reporters. He and other officials also said the proposal would increase loan modifications by eliminating the fears of loan service companies that they could be sued by the banks who actually own the mortgage notes and by getting the majority of lenders involved in loan working-outs, so no one company need fear it is the only one taking such actions.

Consumer advocates said they welcome the proposal.  “Putting forth a high-priority special session focused on the need to mitigate foreclosures as well as to improve the mortgage market is a very positive indication that the governor sees this as a critical priority both for helping homeowners as well as for addressing budget consequences,” said Paul Leonard, director of the California office for the Center for Responsible Lending. The governor is also proposing tighter restrictions on how mortgage loans are issued in the future to prevent predatory lending.

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