Known as SB 1137, the new California foreclosure prevention act became fully effective on September 6, 2008. This legislation only applies to foreclosures on loans made between January 1, 2003 and December 31, 2007. It sunsets December 31, 2013.
The Act's main components are:
- The lender must contact the borrower that is in default at least 30 days prior to initiating foreclosure proceedings in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. The lender must also inform the homeowner that he or she has a right to an additional meeting that must be scheduled within 14 days, upon request. These requirements effectively increase the advance notice period for a California foreclosure sale from 110 days to 154 days.
- The lender must provide the borrower with the telephone number of a HUD certified counselor. The Act Authorizes the HUD certified counselor to represent the borrower in subsequent discussions with lenders regarding options to avoid foreclosure.
- The lender must maintain a toll-free number providing access to a live representative during business hours.
- The lender must provide any renters on the property with either a 60-day notice to quit or a new lease.
- An owner of a vacant property acquired through the foreclosure process must maintain the exterior of the property or be subject to a fine (by a local government entity) of up to $1,000 per day.
Probably the most important of these changes from the previous homeowner's perspective is the requirement that the new owner maintain the exterior of vacant properties to avoid blight. This will likely lead either to quicker evictions by the new owner, or an arrangement with the homeowner under which he or she can remain on the property in exchange for maintaining it.
The new notice and contact obligations placed on the lender may also prove important both to homeowners who want to negotiate with lenders and to homeowners who decide to fight the foreclosure in court (since the greater the number of notice-type requirements placed on a foreclosing lender, the greater the chance that mistakes will be made that justify a court derailing the foreclosure itself). For more information on common defenses to foreclosure, check out this article in the Nolopedia.