As we printed sometime ago, in February the California Foreclosure Prevention Act passed. It comes into effect today, June 15, 2009 and it extends the foreclosure process to 90 days for lending institutions that do not have approved loan modification programs in place.

With the passage of this law, hopefully all lenders will be more helpful in assisting homeowners to remain in their homes.  According to the Sacramento Bee, loan servicers must prove to the state that they have a comprehensive loan modification program in placed to address the increasing need for loan modifications in our difficult times.

It is my understanding that the new law will encourage lenders to adopt President’s Obama’s “Making Home Affordable Program.”  Which means lenders will be more open to cutting interest rates, rewriting loans and getting mortgage payments to below 38 percent of the borrower’s income.  Due to the drastic decrease in home values, it’s also expected that lenders will also assist in reducing principal for those who have suffered a sharp decrease in home values.  Now that the state is stepping in to address the rising problem of foreclosures, hopefully the new law can assist with a decrease in foreclosures!

Now with the new law in place, lenders are required to do the following:

1)  All lenders must submit their proposals for addressing the loan modification crisis with a detailed explanation of their own loan modification program.

2)  If the lender’s program is cleared by the state, the lender does not have to follow the 90 day foreclosure delay, which is now required.

3)  If the program does not pass the state guidelines, the lender will have 30 days to upgrade their current program!

Starting in Mid July we will all have an opportunity to see who is in compliance!