California Mortgage Moratorium Gets Banks to Modify Loans
California, the state with the second highest foreclosure rate, set into motion a 90-day moratorium on foreclosures on Monday. At first glance, the Assembly Bill looks like a 90-day life preserver for homeowners who are in desperate need of relief as they find ways to restabilize their income without the worry of a house payment. However, further reading reveals that the bill’s focus is not the moratorium, but to motivate banks to create thorough loan modification guidelines that are in line with the state.
Allan Glass further explains how the bill will affect struggling homeowners:
“Expected to be the ’stick’ behind the Obama plan’s ‘carrot,’ the bill sponsored by Representative Ted Lieu (D-Torrance) seeks to pressure lenders towards formal modification plans that could help prevent some homeowners from losing their home. Lenders with mortgage modification programs already in place, such as those which include principal deferral, interest rate reductions for five years or more, or extended loan terms may seek exemptions within the next 30 days. These lender restructuring programs must also ensure that new monthly payments are no more than 38 percent of the borrower’s income. Most major lenders voluntarily comply with the Making Homes Affordable program, meaning most lenders will qualify for the state exemption. Currently a list of affected lenders does not exist; the Department of Corporations intends to post a list on their Web site later by mid July.”
The fear from consumer groups is that banks will apply for an exemption from the moratorium due to having loan modification guidelines that match the state’s requirements. With little changed, the line for a modification will continue to grow and troubled homeowners will continue to lose their homes as banks deny them a modification or take too long to get to them. The question posed by REALTORs® is, “How will this affect the market in the long term?” Ninety days is a fair amount of time for a troubled homeowner to stabilize their finances, but most people think it is simply forestalling the inevitable.
Click through to read the rest of Allan Glass’ post.
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June 17 2009 03:12 pm | Real Estate News
June 17th, 2009 at 5:54 pm
[...] Read the rest of this great post here [...]
June 18th, 2009 at 7:13 pm
We all are hoping for better home sales in June and July. Maybe the tax credit will help. I am staying positive. Our Home Inspection business is up 25%. Many of the guys that didn’t have the customer base we do have fallen off the radar.
And in 90+ days inventory will go up again.
I am going to place your link on Twitter so others can follow your blog.
David Founder of
HomeInspectionsServices.org