Backers say it will make lenders try harder to keep borrowers in homes. Starting Monday, loan servicers must prove to the state they have comprehensive loan modification programs in place – or be denied rights to foreclose on their own schedules.
"You have voluntary programs that they don't have to do," said Assemblyman Ted Lieu, a Torrance Democrat who was the author of the bill. "This creates an enforcement mechanism to force them to do it. The hammer is the 90-day foreclosure moratorium, which they all hate."
"The vast majority of large servicers should have no trouble complying. They have already complied with similar requirements at the federal level," said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.
In summary, here's what will happen starting Monday:
• Lenders will submit applications to the state outlining their loan modification programs. That gives them a 30-day exemption from a moratorium.
• If the state OKs a lender's program, the firm is permanently exempt from the 90-day delay on foreclosures.
• If the state rejects the program as inadequate, a lender has 30 days to upgrade it and be reconsidered.
It is "voluntary" but of course you get tremendously punished if you don't comply. I don't think this will have a big effect on the market but it is infuriating the amount of political interference that is happening to stop the bubble from popping when there was none to keep it from inflating in the first place. The politicians are missing the fact that this low interest rate sweet spot is only temporary. Higher rates will come in the future at the same point they have kicked the can down the road. This is not a bad market to liquidate supply and to clear the problem.