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State Law Requires Banks to Offer Loan Modification Program or Accept 90-Day Foreclosure Freeze

June 18, 2009

A state law that took effect June 15 will slow foreclosures for some homeowners and encourage banks to give loan modifications to others, the San Francisco Chronicle reported June 15. The California Foreclosure Prevention Act gives mortgage lenders a choice: Offer borrowers a comprehensive loan modification program or allow an extra 90 days to elapse before foreclosing on defaulted borrowers. The 90-day delay would double the amount of time between default and foreclosure for most borrowers, allowing about six months before a foreclosure could be complete. However, the bill's author, Democratic Assemblyman Ted Lieu of Torrance, said the goal is not to extend foreclosures but to encourage loan modifications.

Under the bill, the loan modification programs lenders offer would have to allow reduced interest rates, extended loan repayment periods or reductions or deferrals of part of the principal. The California Department of Corporations would have the power to approve the plans; a list of participating lenders is available on its Web site. The program is intended to be similar to the Obama Administration's Making Home Affordable program, which offers financial incentives to lenders to modify loans; a spokesperson for the Center for Responsible Lending suggested that the Foreclosure Prevention Act is a "stick" to go with the federal plan's "carrot."

A report from Sacramento's ABC 7 had more on how the bill could affect one homeowner:

As Lake Elsinore loan modification lawyers, we're happy to see state regulators take an active role in the ongoing foreclosure crisis, which has hurt California more than almost any other state. At the very least, the California Foreclosure Prevention Act will give homeowners an extra 90 days to fight a foreclosure or plan for a future that includes one. At most, the Act could make the loan modification process easier for millions of Californians. Even though most lenders say they offer loan modifications, news reports and our own clients have made it clear that many of them actually offer months of delays, unreturned phone calls or meaningless, minor changes. That's a shame, because the right loan modification can save money for everyone in the long run, when foreclosure or bankruptcy is the other option.

The Costa Mesa loan modification lawyers at Howard Law LLP fight for homeowners throughout Southern California who need help to keep their homes. Frequently, clients come to us after their attempts to negotiate a loan workout on their own have failed. Banks pay attention to us even when they won't take calls from their own customers, because we are attorneys -- and that means we can and will sue a financial institution that violates our clients' rights, if necessary. In fact, we have successfully used evidence of predatory lending to help convince banks to give our clients a fairer deal. The goal for our Baldwin Park loan modification attorneys is always to lower our clients' monthly payments to a realistic amount that allows them to keep their homes for the long term.

If you're facing default or foreclosure and you need help to stop it, call Howard Law today for a confidential and completely free consultation. You can contact us through the Internet or call 1-800-872-5925.