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California’s Forgotten, Where is our Government Cheese?
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The State of California has a new law. The California Foreclosure Prevention Act became law this week. The law applies to specified loans that were recorded from January 1, 2003 to January 1, 2008 and only pertains to a principal residence. The law provides the homeowner an additional 90 days, provided the Notice of Default has been filed. There are some exceptions, so please seek the appropriate legal advice to see how this might benefit you.
The reason it was drafted is as follows:
SEC. 2. The Legislature finds and declares all of the following:
(a) California is facing an unprecedented threat to its state and local
economies due to skyrocketing residential property foreclosure rates in
California. Those high foreclosure rates have adversely affected property
values in California, and will have even greater adverse consequences as
foreclosure rates continue to rise.
(b) It is essential to the economic health of California for the state to
ameliorate the deleterious effects that will result from the continued high
rate of foreclosure of residential properties by modifying the foreclosure
process to provide additional time for borrowers to work out loan
modifications while providing an exemption for mortgage loan servicers
that have implemented a comprehensive loan modification program.
If you will recall Governor Schwarzenegger ask lenders to place a 90 day hold on foreclosure proceedings before the holiday season began in late 2008. There was some speculation that foreclosures would begin to escalate in April or May this year as the Obama Housing Plan was announced and the temporary moratoriums expired.
Are Federal Programs Helping Californians?
One of the key components in the Obama Housing Plan called for a laundry list of qualifications but the kicker was that your newly modified mortgage must not exceed 105% of the current market value. Isn’t that like telling the poor “since you have access to a dumpster you are not entitled to food stamps”? Depending on where you live and when your house was purchased, there is a good chance it has lost 30% to 40% of its value over the last few years. Translation, you are not a candidate for a modification and foreclosure is inevitable.
The explanation provided in the article I read stated that if you lived in a state such as Nevada, Florida or Arizona where home prices have plunged there is a good chance you won’t be eligible Where do they think ground zero occurred in the housing bubble? There is no mention of California, just might as well forget that. So the program designed to ease the financial burden of homeowner’s will not help the ones for whom it is intended. If you live in one of the top 4 states which have experienced the greatest crisis, well you are just SOL my friend.
We even have adjustments in the FHA guidelines to address the high cost areas such as LA County which increase the loan limits that can be insured. Why did it just seem to end there? Is California just so far removed from Washington that we are a forgotten people out here? The first time homebuyer credit of $8000 means much more to the young couple in Kokomo, Indiana buying their first house than it does to the same couple in Pasadena, CA. If the median price in Indiana is $100,000 that 8% credit is now worth $40,000 on a $500,000 median priced home here in Pasadena. Where is the equality?
Whle Rome burns we watch the sunset.
Tags: California foreclosues, foreclosure prevention in California, preventing foreclosure in California
June 22nd, 2009 at 2:17 pm
Honestly, these foreclosure moratoriums are worthless. They are only prolonging the inevitable foreclosure and kicking the can down the road. When Schwarzenegger signed SB1137, it was clear that all it would do is prolong the pain. It paused foreclosures so banks could follow the new guidelines and then foreclosures skyrocketed to their normal high pace. If one month’s payment is a hardship, how is someone going to repay the 3 months worth that is delinquent?
Bubble states are surely screwed with any modifications. Value is down too far to be relevant or viable and $8000 is really a worthless “incentive” in bubble states. This points only to more suffering. And even when prices bottom, I don’t expect to see price appreciation of any significance. I think we’re in for a Japan-style housing flatline.
June 22nd, 2009 at 3:01 pm
The Foreclosure Prevention Act will in fact change very few mortgages.
The reason is there are two major exceptions that will be exempt.
The first is that if you are a larger servicer that already has a program in place to help homeowners, your exempt. This is ALL of the large servicers.
The second is that “securitized” mortgages, i.e. all those wrapped up by investors, are exempt as well.
Both groups alone are most of the mortgages – the overlap of the two will pretty much mean almost nobody will required to give anyone an extension.
June 22nd, 2009 at 3:09 pm
One more thing regarding California’s foreclosure prevention. Not sure if you saw this, but lenders and servicers were able to apply for exemptions before the bill passed. Here’s the exemption list: http://www.corp.ca.gov/FSD/CFP/pdf/ExemptList.pdf