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On February 20, 2009, California enacted the California Foreclosure Prevention Act (SBX2 7), adding 90 days to the 3-month period currently required in Civil Code §2924 between the notice of default and the notice of sale for a nonjudicial foreclosure. The Act is applicable to loans recorded between January 1, 2003, and January 1, 2008, that are first liens on owner-occupied principal residences. Implementing regulations were adopted by the California Corporations Commissioner effective June 1, 2009. See Subchapter 14, added to Chapter 3, Title 10 of the California Code of Regulations (http://www.corp.ca.gov/OLP/pdf/rm/0509-FEO.pdf). These regulations clarify the application of Civil Code §§2923.52-2923.53. Based on the statutory enactment and the adoption of these regulations, the law became operative on June 15, 2009. For the Department of Corporations FAQs page on the Act, go to http://www.corp.ca.gov/FSD/faq/CFPA.asp.
Consumer advocates argue that wide loopholes will prevent the legislation from significantly slowing foreclosures. State regulators must grant an exemption from the extended foreclosure period if the lender has put a mortgage modification program in place that meets a satisfactory combination of specified features, including deferral of a portion of the principal, a reduced interest rate for at least 5 years, or an extended amortization period. To be exempt, the modification program must additionally include an adjustment in monthly mortgage payments so that these do not exceed 38 percent of the borrower's gross income-a ratio more favorable to the lender than the 31 percent ratio of the federal Homeowner Affordability and Stability Plan. For consumer information and lists of mortgage loan servicers who have been granted an exemption, go to http://www.corp.ca.gov/FSD/CFP/default.asp. Significantly, SBX2 7 does not require the lender to actually grant the loan modification to anyone in order to be exempt from the additional 90-day period, but only to put a complying program in place.
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