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90 Day Foreclosure Freeze Approved by Arnold in California

California announced a 90-day moratorium on residential foreclosures last Tuesday, offering new hope for California homeowners struggling with newly adjusted sub-prime mortgages. Governor Arnold Schwarzenegger says the move will put a stop to plunging home prices, reduce unemployment, and allow borrowers to hold on to their cash while getting back on their feet.

Lenders with ongoing loan modification may be exempted from the moratorium, provided they meet the standards outlined in the bill. One of these standards is the recently announced Homeowner Affordability and Stability Plan, which aimed to lower mortgage payments to meet the required 38% debt-to-income ratio (DTI).

The moratorium, introduced by Senator Ellen Corbett, is part of a new budget package approved last Friday. It will cover mortgages originated between January 1, 2003 and January 1, 2008, and applied only to homes used as primary residences.

As expected, mortgage lenders are opposed to the moratorium as this may affect their own recovery measures. The California Bankers Association (CBA) has issued a letter of opposition stating that the move will curb home sales, which may further delay the industry’s recovery. CBA spokeswoman Beth Mills adds that lenders and borrowers are already given ample time to work out their current loans, so the delay may not really solve the problem.

The law will take effect towards the end of May.

 

Earlier in Foreclosure News:
Chase Expands Foreclosure Prevention Efforts
Foreclosures Up Despite Government Efforts
Foreclosure Freezes Didn’t Help Borrowers - Clayton

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