Since June 15, 2009, lenders in California who foreclose on defaulting homeowners have to give them an additional three months’ notice – beyond the current three months – before filing a notice of sale for the property.
The California Foreclosure Prevention Act was introduced in an attempt to slow the torrent of foreclosures flooding the state – and with many more to come – and to allow extra time for lenders and borrowers to agree on loan modification terms.
Realistically, nobody expected it to make much of a dent in the number of foreclosures, given that so many people simply can’t pay the mortgage owing to California’s escalating unemployment and poor economy, not to mention the huge price drops that have put them a long way under water.
However, it was hoped that the California Foreclosure Prevention Act would at least force mortgage companies to make more of an effort to modify loan conditions for struggling homeowners.
Unfortunately, this hasn’t worked either, since all the big mortgage lenders were granted exemptions from the new law as soon as it went into effect. This essentially renders the law useless and leaves most distressed borrowers no better off, as the exempt lenders account for over 90% of properties presently under threat of foreclosure in the Golden State.
Federal government efforts to help those facing foreclosure – such as the Making Home Affordable program and the HOPE hotline on 888-995-HOPE or www.hopenow.com – can benefit some of California’s distressed homeowners. State authorities have also teamed up with Spanish-language TV network Univision to provide information and assistance to Spanish-speaking mortgage-holders. There are also community-based counseling programs across the state.
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However, it’s clear that these rather modest measures can make only a minimal dent in California’s burgeoning mortgage disaster. The House of Representatives recently passed the Neighborhood Preservation Act, which is now headed to the Senate for approval. If signed into law, the Act will permit (but not oblige) lenders to offer foreclosed homeowners the opportunity to stay in their homes and pay rent for up to five years, with an option to repurchase the property. |
This would give the lender some cash flow while waiting for the market to rebound, and keep homes occupied and off the market, where they would contribute to delaying the housing price recovery. As the name suggests, the aim is also to keep neighborhoods from deteriorating because of mass foreclosures, as well as to remove the need for families to look for alternative accommodation.
Even if the Neighborhood Preservation Act does become law, we still don’t know how many lending institutions would actually make use of this facility.
It has been suggested that this legislation should be accompanied by a law that gives homeowners the right to remain in their homes as renters. If a renters’ right law of this nature could be enacted quickly, it would help Californians cope with the huge wave of foreclosures expected in the state over the next three years when a million option ARM mortgages reset at sharply higher levels.
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The neighborhoods will not stabilize or return to viability. High fuel costs, endless hours spent commuting, a long muted economic recovery and decreasing state and local tax revenues will all combine to make “suburbia” the new 21st century American slum. The housing stock built in the last 15+ years is particle board and drywall junk requiring high maintenance and excessive costly utility use for livability. The decline in housing values will limit township civic amenities and cripple the primary and secondary school systems. Environmentalism will frustrate the introduction of small scale industry and associated jobs. Those who can, the creative, the highly skilled, the mobile, the high wage earners will all migrate elsewhere.