Summary of CA SBX2 7, the California Foreclosure Prevention Act

http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0001-0050/sbx2_7_bill_20090220_chaptered.html

Synopsis: California enacted SBX2 7 as the California Foreclosure Prevention Act, effective June 15, 2009.  This law amends California Civil Code Sec. 2923 to place a 90-day moratorium on specified loans unless the mortgage loan servicer implements a loan modification program that meets certain criteria.  The moratorium provisions of the Act will expire on January 1, 2011

• Applies to first mortgages recorded between January 1, 2003 and January 1, 2008. 
• The property must have been occupied by the borrower as the borrower's principal residence when the loan became delinquent
• A Notice of Default must have been recorded
• The loan must not have been made through a State of California or a local public housing agency
• Loan servicers and lenders are exempt from the law if they have a mortgage modification program already in place that includes principal deferral, interest rate reductions for five years or more, or extended loan terms. The lender's loan restructuring program also must ensure that the new monthly payments do not exceed 38 percent of the borrower's income.  Note:  T exemption would apply to most of our clients, if not all of them.
• Loans serviced by servicers that have implemented a comprehensive loan modification program are exempt from the moratorium if the program includes all of these features:
• The program is intended  to keep the borrower in his/her principal residence if the loan when the recovery under the loan modification exceeds the anticipated recovery from foreclosure
• The program aims to decrease the borrower’s housing-related debt to 38% or less of the borrower’s gross income
• The program includes some combination of the following:
• Interest rate reduction, as needed, for a fixed term of at least five years
• Extension of amortization period for the loan term no more than 40 years from original loan date
• Deferral of some portion of the principal loan amount until loan maturity
• Reduction of principal
• Compliance with federally mandated loan modification program
• Other factors the Commissioner of Financial Institutions, Real Estate or Corporations, as applicable, may determine
• The moratorium does not apply if:
• the borrower has surrendered the property, as evidenced by a letter confirming the surrender or delivery of the keys to
  the property to the mortgagee/trustee/beneficiary, or authorized agent
• the borrower has contracted with an entity whose primary business is to extend the foreclosure process even though borrower has already decided to leave the home
• A Chapter 7, 11, 12, or 13 bankruptcy has been filed and remains unresolved
• Mortgage loan servicer means a person or entity that receives or has the right to receive installment payments of principal, interest, or other amounts placed in escrow, pursuant to a mortgage loan or deed of trust, and services or enforces the loan as the note holder, or on behalf of the note holder.