90-Day Moratorium for California

The California Legislature, as part of the recently-passed budget package, approved Friday, legislation SB2X-7 and AB2X-7, which provide for a 90-day foreclosure moratorium. The bill, introduced by Sen. Ellen Corbet (D-San Leandro), covers owner-occupied homes where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008. “Many people in our communities are facing the terrible specter of foreclosure,” Corbett said, according to the San Francisco Chronicle. “I’m just trying to find a way to help.” The bills do, however, allow servicers to be exempt from the moratorium if they have an approved loan modification program in place that meets a combination of criteria — a deferral of a portion of the loan’s principal, for example, or lowered interest rates for at least five years or an extension of the loan terms. A law passed in California in 2008 increased the required time period from first notification to final sale by 30 days to a total of 141 days — which many argue just delayed the inevitable. Critics of the bill, typically bankers, say a moratorium is unnecessary, as they believe more time isn’t the silver bullet to every troubled loan. A letter from the California Bankers Association, speaking out against the legislation, said a moratorium will just create uncertainty, postpone economic recovery and suppress home sales. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.