Ninety Day Foreclosure Moratorium Included in Budget Deal
Significant reform for home owners in California
Some good news came out of a budget filled with cut backs and tax hikes. An aggressive and much needed foreclosure prevention program that will halt all foreclosures in the state for 90 days was included as part of the final budget package.
“The California legislature did what the banks were supposed to do with the $350 billion we gave them in October; they found a way to keep people in their homes,” said CALPIRG Legislative Advocate Pedro Morillas. The California Foreclosure Prevention Act will help stabilize the economy by reducing the number of foreclosure notices sent out every month.
In January, 76,761 more California homeowners received foreclosure notices. The foreclosure prevention act will turn this trend around by requiring banks to implement a large scale modification of all of their defaulting loans that meet certain requirements.
The most important requirement is that the loan must be worth more to the investor who owns the loan on Wall Street after modification than after going through foreclosure. Once this provision is met the modification will result in monthly payments to the home owner of no more than 38% of their income.
This program is similar to what has been in place at IndyMac Bank since it was taken over by the FDIC. Between July 11th 2008 and November 20th 2008 the FDIC has successfully modified 5,300 loans.1
“The bottom line is, if we are going to reduce the numbers of foreclosures plaguing the state, we need to reduce the amount people are paying for their mortgages,” according to Morillas.
-30-
1) FDIC Announces Availability of IndyMac Loan Modification Model "Mod in a Box" Road Map Now Available to Institutions. FDIC press release. November 20, 2008.
