California Mortgage Relief - Bill 1137 And Loan Modification

There is hope for California homeowners facing foreclosure. In July of 2008 California passed SB (Senate Bill) 1137  to aid homeowners before during and after the foreclosure process.  It has also been referred to as the California Mortgage Relief Bill.

The features of the bill are designed to help many homeowners avoid foreclosure, to make the moving process easier for those who do lose their homes, and to protect the property values of the surrounding homes after foreclosures occur. The three major points of the bill are as follows:

#1 - Loan modification before default. Lenders will be required to contact homeowners to discuss loan modification before sending a default notice. A default notice is basically a letter sent by the lender to the borrower that informs the borrower that their loan is officially declared "in default" and that foreclosure proceedings have begun.  The default notice is usually sent when the borrower is 90 to 120 days delinquent on mortgage payments.

#2 - Sixty day notice to tenants. If no loan modification can be arranged and the bank forecloses, the borrower is no longer considered the homeowner because the bank has taken over the property. Therefore the homeowner becomes a "tenant". Before the bill passed, lenders were required to give the "tenant" a thirty day notice to vacate the property.  The bill extends that notice to sixty days. Now, homeowners will have a little extra time to find another place to live before being evicted from their homes.

#3 - Lenders are required to maintain vacant homes.  Foreclosed homes can remain vacant for months before they are sold. As these homes sit empty month after month, they are usually not maintained by the bank.  As the property goes down, so do the values of the homes in the area. This scenario is a major contributor to the recent decline in the housing market as more and more homes have gone into foreclosure. Senate Bill 1137 requires lenders to maintain these vacant properties or face fines of up to $1000 a day until needed maintenance is performed.

Expect more bills like this  one in the near future but dont expect Banks and Mortgage lenders to become your best friend. Banks will try to come out ahead at your expense. If you are going through the loan modification process, be careful.

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