As a California real estate professional, my clients have been asking me quite a few questions about the new law that will take effect on May 21, 2009 involving extending foreclosure periods by 90 days.
Instead of explaining all of the legal mumbo-jumbo (and believe me there is a lot of it); let me take a few moments to explain the new law in easy-to-understand terms.
The first and most important thing to do if you’re facing a possible foreclosure situation is to check with your mortgage lender. The new law (extension of time) does not apply to lenders that currently offer a loan modification program.
The new law only applies to owner-occupied homes only where the first loan was recorded between January 1, 2003 and January 1, 2008. The new law will extend the time period before the filing of notice of sale by 90 days beyond the current three month period following the filing of the original notice of default.
In order for your lender to qualify for an exemption from this new law, your lender must offer a comprehensive loan modification program that includes the following features:
1. The program is intended to keep borrowers (you) in your home when the anticipated recovery period under a loan modification exceeds the recovery period through foreclosure on a net value present basis.
2. It targets a debt-to-income ratio of 38% or less.
3. It includes a combination of the following features:
· An interest rate reduction for at least five years
· An extension of loan term to no more than 40 years
· A deferral of some portion of the unpaid principal balance
· A reduction in principal
· Full compliance with a federally mandated loan modification program
· Seeks to achieve long-term sustainability for the borrower (you) when determining a loan modification solution.
Additionally it’s very important to understand that the following loans are exempted from the 90 day extension under the new law.
1. A loan made, purchased, serviced or used as collateral by a California State or local housing finance agency.
2. Loans where the borrower (you) has surrendered the property, contracted with an organization regarding how to extend the foreclosure process, or filed for bankruptcy and the case has not been closed or dismissed.
All of the provisions of this new law will be repealed on January 1st, 2011 unless the California Legislature extends them.
To learn more about the law or other real estate issues visit http://www.foustonline.com/
If you’re thinking of foreclosing or doing a short sale, please contact us. We will be glad to spend time answering all of your questions and helping you find the critical resources you will need during this challenging time.