Changes to California Foreclosure Laws

Today, September 10, 2008, 14 hours ago
Effective immediately mortgage lenders must contact California home borrowers to discuss loan modifications by phone or in person before entering foreclosure proceedings under a new law Gov. Arnold Schwarzenegger signed Tuesday.

Senate Bill 1137 prohibits lenders from filing a default notice until 30 days after contacting a borrower or making legitimate attempts to do so. The law by Senate President Pro Tem Don Perata, D-Oakland, also requires that tenants receive 60 days\' written notice to vacate a property once it is foreclosed. And enables cities to impose fines of up to $1,000 a day on property owners who do not maintain vacant homes purchased in foreclosure, a tool aimed at preventing blight in hard-hit neighborhoods.

The Senate in January killed an earlier Perata bill that faced intense opposition from the mortgage industry and had stricter requirements, such as a face-to-face meeting between borrower and lender. SB 1137 did not face opposition and had bipartisan support.

Perata and Schwarzenegger said that the law will help stem the tide of foreclosures in California by forcing lenders to contact home borrowers before starting costly proceedings. They suggested that early communication will encourage both parties to explore payment modifications that avoid foreclosure.

As much as it sounds like a great idea to require more than just letters to notify owners about their foreclosure -- I am not quite sure HOW they will determine what constitutes good communication by the lender and what does not -- or how they will regulate this new law. Stay tuned for more on this, as I learn more here