Decline in California Foreclosure Activity: Due to New Legislation

Last September, the California Senate Bill 137 was passed as response to the worsening problem in the state’s housing industry. The said bill included a provision that requires lenders to contact the distressed homeowner several times and wait for another 30 days after initial contact before filing for foreclosure. After its implementation, ForeclosureRadar.com reported a 61.8 percent decline in default notices and a 47.3 percent drop in trustee sales notices. Although this should be interpreted as good news, the website does not consider it as such. Instead, it believes that it has only made it even more difficult to understand and determine the real state of the local housing industry. For them, the long term effect of the said bill is to only delay the foreclosure process and not really provide troubled borrowers with genuine assistance. To make matters worse, the new legislation also encourages loan modification. The problem is that most of the troubled mortgages show negative equities which will make it close to impossible for lenders to change any terms of the mortgage. The only way a loan modification can work is if the lender agrees to significantly reduce the principal balance or lower the interest rates – both of which pose considerable risks to the lenders. If the lender agrees, it could encourage the other non-defaulting borrowers to default just so they could enjoy lower mortgage rates or principal reduction. For homeowners facing foreclosure in California, it is probably best for you to consider availing of the mortgage relief program sponsored by the government. There are certain requirements you must meet before qualifying but if you do qualify, you will be able to shift your existing mortgage to a government-backed housing loan, which has a fixed interest rate. Check with your local county office for more details about this program.