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.