California Foreclosure Moratorium – The Perversely Named California Foreclosure Prevention Act

The California Foreclosure Moratorium is a joke, and homeowners know it! Politicians should remember the old saying: “You can’t fool all the people all the time.” In this case, it looks like they haven’t fooled anybody.

An ongoing Orange County Poll with well over twelve hundred respondents confirms that homeowners aren’t fooled. An incredible 92% of all respondents feel the California Foreclosure Moratorium will either not stop any foreclosures, or may stop only a few. (1)

The perversely named California Foreclosure Prevention Act, also known as the California Foreclosure Moratorium, is supposed to enact a 90 day foreclosure delay on owner occupied homes, where the first mortgage was recorded between January 1, 2003 and January 1, 2008, and provided a Notice of Default has been recorded.

However, the monster loophole which makes this law such a joke is that this new law doesn’t apply if the loan is serviced by a financial institution that has a “comprehensive loan modification program” in place. Any financial institution with such a program in place, can obtain an exemption from the law. As should be known by everybody, this loophole allows every financial institution to obtain an exemption and then ignore this law.

It’s amazing how the law was conveniently written so that none of these institutions actually has to do a loan modification for any of their homeowners; they just have to have a theoretical loan modification program written out and tucked away. You know, something that the CEO can pull out if he’s ever called upon to discuss his bank’s “comprehensive loan modification program.”

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So who do we have to thank for giving us this poorly written and ineffective law? Apparently none other than Senate Judiciary Committee Chairwoman, Ellen Corbett (D-San Leandro).

It’s amazing that Senator Corbett, an attorney, could write such a law with such an incredible loophole. Which, by the way, is just the most egregious of many loopholes within the law which was apparently written so that if any financial institution didn’t have a loan modification program in place, they could avoid following the law through numerous other means.

I’m not going to say the law was purposely written by this Senator and attorney so the financial institutions wouldn’t be affected by it and wouldn’t actually have to follow it; however, that is the net effect of this law, due to the way in which it was written. The bottom line is the California Foreclosure Moratorium law is a bad joke played upon struggling homeowners, with the politicians and bankers alike well aware of its irrelevance.