HREU Students and future students….here we go again…another foreclosure moratorium….remind me, did the last one work?

California implemented a new foreclosure moratorium on Monday to goad banks into modifying mortgages for struggling homeowners.

Hey guys, maybe we should talk about what the downside is to doing this….as in:

1) More people actually missing payments because they now know they can stay in their homes…payment free….for 12+ months. In the olden days when the word foreclosure was akin to leprosy the LAST thing someone would stop paying was their home. Why? They needed a place to LIVE. They would have their cars repo’ed, their cable turned off….and east rice and Ramen Noodles. Not today…not when you can miss payment (after payment) and more or less game the system…..all the while living payment free. All these moratoriums are actually motivating people to miss payments. Hello…anyone listening?

2) When doing short sales…seconds will demand more from the first if they know they first cant foreclosure because of the moratorium. That means that these well intentioned moratoriums create MORE foreclosures…not less.

The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February, adds 90 days onto the time period between when homeowners default on a loan and when their home can be repossessed in foreclosure. Banks can avoid the 90-day holdup by having a comprehensive program in place to make mortgages more affordable by reducing the interest rate, extending the loan term, or reducing or deferring some of the principal. Such programs must be approved by regulators.

“The goal is to compel banks to do systematic loan modifications across California to reduce our foreclosure rate, which is the highest in the nation,” said Assemblyman Ted Lieu, D-Torrance, who wrote the bill. “Until we slow that down, the California economy cannot recover.”

Ok, this I agree with. Loan mods are a great solution for some borrowers. Folks who want to keep their homes and can make the modified payments. Realtors learn how to mod your own home loan now..and then start your own loan modification business. Make money now from helping others save money! Watch the FREE Agent Loan Mod Secrets video now!

Experts said the California initiative should complement the Obama administration’s foreclosure prevention plan, which offers financial incentives to servicers who complete loan modifications.
“This law is most useful as a stick to supplement the Obama administration’s carrots to get loan servicers to adopt a much more systematic framework for doing loan modifications,” said Paul Leonard, director of the California office in Oakland for the Center for Responsible Lending. “It is a useful nudge to get more servicers to sign contracts to adopt the Obama modification plan.”

In the past few months, 15 servicers have agreed to implement the Obama plan, according to the Web site MakingHomeAffordable.gov. Government spokesmen have said that about 100,000 homeowners nationwide have been sent offers for trial modifications, a relatively modest number compared with the administration’s goal of helping 3 million to 4 million homeowners avoid foreclosure.

In California, the Department of Corporations will determine whether banks qualify for an exemption from the moratorium. About a dozen servicers had applied as of last week, said department spokesman Mark Leyes; they will now have a 30-day grace period while their applications are reviewed. A list of the participating banks will be at www.corp.ca.gov.

Leyes said the department will monitor the servicers’ success rate regularly, not just accept their word that they have a program in place. Still, he added, “There is no guarantee in the law or anywhere else that anybody is going to get a loan modification. What we’re looking for is a good-faith effort on the part of the servicer to do what they can to make the loan affordable and sustainable for the homeowner.”

The California law, like the Obama plan, says that servicers can determine whether a foreclosure or a loan modification is more cost-effective and can pick the cheaper option.

Realtors learn how to mod your own home loan now..and then start your own loan modification business. Make money now from helping others save money! Watch the FREE Agent Loan Mod Secrets video now!

Dustin Hobbs, a spokesman for the California Mortgage Bankers Association, said lenders generally do not like moratoriums because they haven’t worked in this past, but they are taking a wait-and-see attitude toward the new California law because it includes a pathway for banks to avoid the delay.

“Because there is so much similarity between some of the provisions and requirements in this law and the new programs at the federal level, my guess is that a lot of the larger servicers will have no trouble qualifying,” he said.

In September, California implemented another law that required servicers to make more efforts to contact homeowners before foreclosing. That law caused a dip in the number of foreclosure filings throughout the fall months, but they have resurged this year now that lenders have caught up with the requirement.
Source: sfchronicle.com.

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