Mortgage Insights Blog

First proposed back in August of 2007, yesterday California Gov. Arnold Schwarzenegger proposed another push for a 90-day ban on foreclosures. By now, everyone understands the impact that rising foreclosures have had on the California housing market and overall economy and means to prevent additional foreclosures should be considered.

The proposed state program would give borrowers and lenders enough time to find a solution to their problems or work out a modification to the terms of their existing loan. In fact, several lenders are proposing the same actions on their own – JP Morgan Chase has recently announced that they will not be foreclosing on any further loans for the next 90 days until they have ironed out their own foreclosure prevention plan for delinquent borrowers. (Read more at CNN Money.com)

We have already seen declines in the number of Notice of Defaults recorded statewide as a result of tougher foreclosure laws passed earlier this year in California requiring lenders to document their attempts at contacting borrowers forcing them to make attempts at preventing the foreclosures.

Schwarzenegger claims that his plan for California borrowers is better than the one President-Elect Barack Obama plans to propose because it offers a “safe harbor” to mortgage lenders. The bill will allow lenders that can prove they have offered a robust modification program to avoid having to stop individual foreclosures, but the overall affect is to force lenders to make foreclosure a last report. Additional stipulations of the bill are expected to be tougher licensing requirements for loan originators and to ask to allow the state Department of Real Estate and Department of Corporations to enforce federal laws and regulations regarding the Truth in Lending Act.

Whatever may transpire in the next 30 days it seems that things are finally off in the right direction. Schwarzenegger is expected to explain the program in further details on Thursday.