Why The 90 Day California Foreclosure Moratorium May Not Help You

Why The 90 Day California Foreclosure Moratorium May Not Help You

Most of the California news media coverage of the 90 day foreclosure moratorium may be giving many homeowners a false sense of security about how much time they have to either work out a loan modification or prepare for a short sale.

Instead of calling this the 90 Day Moratorium, we should really be calling it an UN-Moratorium.

Here is a summary of a response from one of our trusted attorneys that highlights how this misinformation will end up hurting homeowners:

Senate Bill 7 was signed by Gov. Schwarzenegger on February 20. It became effective on June 15, 14 days after regulations were published (June 1).

SB 7 added Civil Code Sec. 2923.52, which provides that for the covered loans only, if a loan servicer does not have an approved, compliant loan modification program, the time for filing a Notice of Sale on a primary residence is extended an extra three months after expiration of the normal three month period from recording a Notice of Default. Contrary to media implications, nothing in the new law prohibits a lender from commencing or maintaining a foreclosure, even if it is subject to the 3-month extension.

Lenders that offer modifications will likely do so during the NOD period (or prior) so that qualification (or not) under the mod program will be determined prior to the end of the normal 3-month NOD period. That means for non-qualifying owners, there should be no change, while those receiving mods should know before the end of the 3-months (if an NOD has even been filed).

I believe that due to the new law lenders will be more willing to offer mods. However, many borrowers are going to be shocked to receive NODs, when the media told them there was a moratorium.

A key point to pull out from the bill below is as follows:

2923.53. (a) A mortgage loan servicer that has implemented a comprehensive loan modification program that meets the requirements of this section shall have the loans that it services exempted from the provisions of Section 2923.52, upon order of the commissioner. A comprehensive loan modification program shall include all of the following features:”

Basically, this states that any lender with a modification program in place may be qualified for an exemption.

Here are a few bullets from Section 2923.52:

SEC. 3. Section 2923.52 is added to the Civil Code, to read:

2923.52. (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to
take sale shall not give notice of sale until at least 90 days after
the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:

(1) The loan was recorded during the period of January 1, 2003, to
January 1, 2008, inclusive, and is secured by residential real
property.

(2) The loan at issue is the first mortgage or deed of trust that
the property secures.

(3) The borrower occupied the property as the borrower’s principal
residence at the time the loan became delinquent.

(4) The notice of default has been recorded on the property.

(b) This section does not apply to loans serviced by a mortgage
loan servicer if that mortgage loan servicer has obtained a temporary
or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.

(c) This section does not apply to loans made, purchased, or
serviced by:

(1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the
Health and Safety Code and Chapter 6 (commencing with Section 980) of
Division 4 of the Military and Veterans Code.

(2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).

(d) This section shall become operative 14 days after the issuance
of regulations, which shall include the form of the application for
mortgage loan servicers, by the commissioner pursuant to subdivision

(d) of Section 2923.53.

(e) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.

Here is a list of the lenders / servicers who are currently exempt as of July 2, 2009:

Give us a call today so that we can help you determine how this California 90 Day Foreclosure Moratorium applies to your unique scenario.

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Related Articles:

• California Surfers Support 90 Day Foreclosure Moratorium
• California Moratorium Sham – We’ve Been Lied To
• San Francisco Chronicle – Moratorium has wide loopholes

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