In an effort to help the thousands of Californians who are in default of their home mortgages, a new law now requires lenders to meet with defaulting borrowers and explore ways to avoid foreclosure, according to a legal expert.
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“The lending industry had pledged to work with their borrowers who were facing foreclosure on their homes, but there was ample evidence that this was not being done in many cases,” says Michael D. Berk, a real estate attorney with Los Angeles-based Greenberg Glusker. “As result, the legislature sought to make lender contact mandatory as well as to provide some protection for residential tenants and to protect communities from blight caused by rundown vacant foreclosed residential properties.”
According to Foreclosures.com, California recorded 116,857 foreclosures in the first six months of 2008.
The new law, which was authored by Senate Pro Tem Don Perata (D-Oakland) and signed by Governor Schwarzenegger in July, went into immediate effect, but the new requirements for notices of default and notices of sale in the statue did not go into effect until September 8. Berk says the new law applies to residential loans made between 2003 and 2007 when many questionable high cost loans were made to unqualified or unsuspecting borrowers.
Under the new law, mortgage lenders must contact a borrower to discuss a loan modification or workout plan prior to starting foreclosure proceedings. The borrowers then have at least 30 days after the meeting to take whatever steps that might be available to allow them to keep their home. The new law allows the borrower to have a HUD-certified housing counselor, attorney or other advisor to act on the borrower’s behalf, according to Berk.
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