With the available houses for sale in Southern California already in short supply, California on June 15th 2008 enacted the California Foreclosure Prevention Act. Under this new law a lender or loan servicer must wait an additional 90 days more than normally required by law to foreclose (notice of sale) on certain mortgages. However, a lender or loan servicer can be granted an exemption if they have a loan modification program in place that meets specific criteria.
This New Law Contains Many Loop Holes
- The loan can not be made, held, serviced, or collateralized by California State or Local Housing Agency.
- This law also does not cover mortgages that have been bundled in to securities.
- It must be the first mortgage or deed of trust secured by residential property.
- Must have been recorded between January 1st 2003 and January 1st 2008.
- A notice of default has been recorded on the property.
- The residence has to be owner occupied.
- The borrower can not be in bankruptcy.
Since there are so many loop holes and the fact that most of the major banks have loan modification programs in place many homeowners will not qualify for this program. Consequently this new law should have little or no effect on bank owned homes coming on the market.
With more than 365,000 foreclosures in California since 2007 and currently an average of 80,000 to 90,000 foreclosure filings monthly there are going to be a continued supply of available REO properties for quite some time.
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