A California foreclosure law which took effect on Monday is being pitched as the latest offering by the state’s elected officials to protect their constituents from foreclosure. The new law requires that lenders operating in California must delay a foreclosure proceeding by ninety days if that lender hasn’t worked with the homeowner to modify the mortgage.
The toothless part of the law, a loophole “big enough to drive a truck through” according to one industry watcher, exempts lenders and loan services “that already have a comprehensive loan modification program in place”. Unfortunately, the law will not apply to some of the biggest lenders in the state including Wells Fargo, BankAmerica, and J.P. Morgan Chase because they’re already doing home loan modifications. That goes for pretty much every lender doing business in the state as confirmed by Chris George, president of San Ramon-based CMG Mortgage Services and a board member of the California Mortgage Bankers Association who said “The vast majority of them are already in compliance with some regulation or requirement, either through federal laws or voluntary efforts”.
A much shorter list would those aren’t doing loan modifications yet. In fact, a Google search using “California lenders that aren’t doing loan mods” didn’t bring up a single lender. Even if somebody finds an out of compliance lender, according to Sean O’Toole of ForeclosureRadar, “All you have to do is put in a loan modification program.” Paul Leonard, director of the Oakland-based California office of the Center for Responsible Lending, said that the new state law is intended to work in conjunction with the Obama administration’s foreclosure protection plan that includes financial incentives made to lenders, loan servicers, and borrowers who participate in loan modification programs.
The problem with that idea is that, as of a couple weeks ago, no one was sure how many loan modifications had actually been completed under the guidelines of Obama’s “Making Home Affordable” program. The Treasury originally estimated the number as being between 10,000 and 55,000 but withdrew that estimate saying “… that the Treasury was working with mortgage companies to fine tune reporting systems.”
It actually appears that government efforts are resulting in a “pushing on a string effect” with a lot of effort at one end and foot dragging by lenders at the other. That foot dragging has resulted in the slowing down of do it yourself modifications while attorney driven home loan modifications are continuing to be executed at a brisk pace. It’s further evidence that California homeowners should not rely on government assistance and free loan modifications to pull their homes out of foreclosure. The attorney driven home loan modifications are what’s working now and the sooner struggling California homeowners realize that, the better off they will be.

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