You can literally hear the clock tick when facing a looming and ominous foreclosure sale date. Tick tock goes the clock and the time just flies by. Now top that off with stress, lack of money, paralysis by analysis and we have a recipe for another lost home to foreclosure.
American homeowners need to know that there are laws that can help protect them. These news laws help them stay in their homes longer and some clarify that their servicer MUST do its “due diligence” when looking into a loan modification by a delinquent or defaulting borrower.
* Let’s take a look at a few states and some of these new consumer friendly foreclosure laws.
View a copy of California’s Senate Bill 1137.
A new state law in California requires lenders to wait an additional 30 days after a homeowner misses the first payment before filing a default notice and use more “due diligence” to attempt a loan modification.
A bank or mortgage servicer has a duty to its investors to offer loan modification terms that will yield a net present value that is greater than what would be achieved if a lender took back and sold the collateral.
Section 1(c) states:
Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.
The laws took effect July 8.
California is following a few other states in the adoption of consumer friendly foreclosure protection laws
New York Foreclosure Laws:
New York which passed a bill last week that requires lenders to send a preforeclosure notice to certain borrowers at least 90 days before foreclosure proceedings may be initiated.
Massachusetts Foreclosure Laws:
In Massachusetts, homeowners now have a three-month grace period after they default on their mortgage before the lender can file to foreclose. The Massachusetts law is credited with an 84% drop in foreclosure petitions — the first step in the foreclosure process — filled statewide in June from a year earlier, according to the Warren Group, a Boston-based research firm.
Wall Street Journal:
Critics, however, say the new laws are only delaying inevitable foreclosures and may signal a false bottom in the housing market.
“It’s all smoke and mirrors,” says Vincent Valvo, group publisher at the Warren Group. “People are going to trumpet this and say foreclosures are going down. But three months from now it will surge right back up.”