Governor Schwarzenegger Places 90 Day Freeze on California Foreclosures

California Governor, Arnold Schwarzenegger signed into law a 90-day moratorium on home foreclosures on Tuesday. The foreclosure freeze bill will impose a 90-day moratorium on foreclosures in the state of California. The bill exempts lenders who have a loan modification program in place meeting the standards set forth in the bill.
One such mortgage servicing standard including the Homeowner Affordability and Stability Plan laid out by the Obama Administration last week, which sought to lower payments to 38% of a borrower’s income (higher than the 31% DTI standard in the Obama Administration’s plan.)

The California Legislature, as part of the recently-passed budget package, approved Friday, legislation SB2X-7 and AB2X-7, which provide for a 90-day foreclosure moratorium. The bill, introduced by Sen. Ellen Corbett, D-San Leandro, as a trailer to the California budget package, covers owner-occupied homes where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.

Mortgage bankers are naturally opposed to the bill. A letter of opposition from the California Bankers Association, and other financial trade groups said a foreclosure moratorium will create uncertainty, delay economic recovery and stifle home sales.

Beth Mills, spokeswoman for the California Bankers Association, said struggling borrowers and their lenders already have more than enough time to search for mutual solutions. A state law passed last year increased the required period from first notification to final sale by 30 days, to a total of 141. More time is not the silver bullet to every troubled loan, she said.

The foreclosure moratorium law will go into effect in late May.

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