Will New Foreclosure Legislation in California Spread to Other States?

New mortgage legislation signed by California Governor Arnold Schwarzenegger on July 8, 2008 is designed to protect homeowners and renters caught in the nationwide foreclosure crisis. What does Senate Bill 1137 do and how may it affect other states dealing with home foreclosures?  

Mortgage Lenders, Borrowers Overwhelmed
Many homeowners found it difficult making monthly mortgage payments when interest on their adjustable rate mortgages rose. Compounding the problem, homeowners also found it difficult to discuss mortgage solutions such as a refinancing or loan modifications with their lenders when they needed help. Not only are most mortgages handled by third party agents or servicers who are unable to answer questions regarding defaults, but most lenders simply did not have the staffing or the ability to deal with the volume of foreclosures. As a result, homeowners in need of interest rate reductions or loan modifications were left without support and direction--and many lost their homes as a result. How has this changed?  

Mortgage Bill SB 1137 Effective immediately, SB 1137 requires:  

  • Lenders MUST contact California home borrowers to explore loan modifications by phone or in person before starting foreclosure proceedings.
  • Mortgage Notice of Defaults cannot be filed for at least thirty days after contacting a delinquent borrower or making legitimate attempts to do so.
  • Tenants in foreclosed properties must receive sixty days written notice to vacate.
  • California cities may impose fines of up to $1,000 a day on property owners who do not maintain vacant homes purchased in foreclosure to reduce neighborhood blight.

Hopefully this new law will encourage lenders to explore loan modifications, or mortgage refinances, with borrowers and stem the tide of foreclosures not only in California but in other states as well. No one benefits from a home foreclosure. As Governor Schwarzenegger says, "Losing a home to foreclosure is a financial and also an emotional crash that takes sometimes years to overcome. Foreclosure not only devastates families, but it hurts neighborhoods and it depresses our economy and our budget, and we lose a lot of jobs, of course."

More Help for Homeowners in Mortgage Danger
Endangered homeowners nationwide may also benefit from little-used government loans such as the Streamline K or the U.S. Department of Agriculture's Rural Development program. These loans offer new purchase mortgages or refinance loans that feature lower interest rates and financing over 100% of the home's value. They are designed to help home buyers buy and fix distressed homes as well as aid home sellers in the repair and improvement of homes for sale. Go to www.fha.gov or http://www.rurdev.usda.gov to get more information and find a reputable lender to get started.  

Source: The Sacramento Bee, Tuesday, July 8, 2008, Schwarzenegger Signs Mortgage Bill, by Kevin Yamamura.

Posted By :
Sheryl Landrum is a Loan Officer in San Diego, California and a freelance writer specializing in mortgage issues.

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