Whenever a disaster happens, there is heated debate as to who is responsible and what should be done to improve the situation. The scope of the sub-prime mortgage and foreclosure problem can be called a disaster as thousands of families across the country have lost their homes. The debate about the shared responsibility between borrower and lender will continue among people who truly want to address the problem and prevent it from happening again in the future - should homeowners take a more active and responsible role in dealing with defaults and foreclosure or should the government regulate banks and lenders more closely? State legislators gave their latest answer with a new law Governor Schwarzenegger signed last week.
Senate Bill 1137, which is now in effect, requires mortgage lenders to contact California home borrowers to discuss loan modifications by phone or in person before entering foreclosure proceedings. Lenders are also prohibited from filing a default notice until thirty days after contacting a borrower or making legitimate attempts to do so. The law also requires that tenants receive sixty days' written notice to vacate a property once it is foreclosed.
State senator Don Perata and Governor Schwarzenegger said that the law will help slow the number of foreclosures in California by forcing lenders to contact home borrowers before starting the foreclosure process, which is costly for both the lender and homeowner. They suggested that early communication will encourage both parties to explore payment modifications that avoid foreclosure.
Paul Leonard, director of the California office of the Center for Responsible Lending, a research and policy nonprofit group, said the goal of the law should be to encourage meaningful loan modifications for borrowers who can avoid foreclosure rather than being a temporary action to cover up fundamentally bad loans. Leonard also said that though the law’s requirements are untested, the requirement that all lenders follow a specific process of contacting borrowers to discuss options that avoid foreclosure is a good step forward.
The new law also enables cities to charge property owners with fines of up to $1,000 a day if they do not maintain the appearance of vacant homes purchased in foreclosure.
California recorded 116,857 foreclosures in the first half of 2008, according to ForeclosureS.com, which lists more than 3,000 foreclosure sale properties in Alameda County.
The monthly number of home loan modifications has increased since January, according to the California Department of Corporations. Lenders modified 9,448 loans in April and 8,686 loans in May, compared with 5,812 in January.
The new law stipulates that:
• Lenders make a good faith effort to contact borrowers before issuing a Notice of Default (NOD). The methods and timing of the contact are spelled out in the bill.
• Requires lenders to provide a toll-free number for Housing and Urban Development (HUD) certified housing counseling agencies.
• Requires that a NOD shall include a record of the lender’s attempts to contact the borrower.
Senate Bill 1137, which is now in effect, requires mortgage lenders to contact California home borrowers to discuss loan modifications by phone or in person before entering foreclosure proceedings. Lenders are also prohibited from filing a default notice until thirty days after contacting a borrower or making legitimate attempts to do so. The law also requires that tenants receive sixty days' written notice to vacate a property once it is foreclosed.
State senator Don Perata and Governor Schwarzenegger said that the law will help slow the number of foreclosures in California by forcing lenders to contact home borrowers before starting the foreclosure process, which is costly for both the lender and homeowner. They suggested that early communication will encourage both parties to explore payment modifications that avoid foreclosure.
Paul Leonard, director of the California office of the Center for Responsible Lending, a research and policy nonprofit group, said the goal of the law should be to encourage meaningful loan modifications for borrowers who can avoid foreclosure rather than being a temporary action to cover up fundamentally bad loans. Leonard also said that though the law’s requirements are untested, the requirement that all lenders follow a specific process of contacting borrowers to discuss options that avoid foreclosure is a good step forward.
The new law also enables cities to charge property owners with fines of up to $1,000 a day if they do not maintain the appearance of vacant homes purchased in foreclosure.
California recorded 116,857 foreclosures in the first half of 2008, according to ForeclosureS.com, which lists more than 3,000 foreclosure sale properties in Alameda County.
The monthly number of home loan modifications has increased since January, according to the California Department of Corporations. Lenders modified 9,448 loans in April and 8,686 loans in May, compared with 5,812 in January.
The new law stipulates that:
• Lenders make a good faith effort to contact borrowers before issuing a Notice of Default (NOD). The methods and timing of the contact are spelled out in the bill.
• Requires lenders to provide a toll-free number for Housing and Urban Development (HUD) certified housing counseling agencies.
• Requires that a NOD shall include a record of the lender’s attempts to contact the borrower.