Mortgage lenders must contact California home borrowers to explore loan modifications by phone or in person before starting foreclosure proceedings under a new law Gov. Arnold Schwarzenegger signed today.
Senate Bill 1137, which takes effect immediately, prohibits lenders from filing a default notice until 30 days after contacting a borrower or making legitimate attempts to do so. The new law by Sen. Don Perata, D-Oakland, also requires that tenants receive 60 days' written notice to vacate a property once it is foreclosed.
The Senate in January killed an earlier Perata bill that faced intense opposition from the mortgage industry and had stricter requirements, such as a face-to-face meeting between borrower and lender. The bill signed Tuesday, SB 1137, did not face opposition and had bipartisan support.
Perata and Schwarzenegger said today that the law will help stem the tide of foreclosures in California by forcing lenders to contact home borrowers before starting costly proceedings. They suggested that early communication will encourage both parties to explore payment modifications that avoid foreclosure.
"Losing a home to foreclosure is a financial and also an emotional crash that takes sometimes years to overcome," Schwarzenegger said. "Foreclosure not only devastates families, but it hurts neighborhoods and it depresses our economy and our budget, and we lose a lot of jobs, of course."
The new law also enables cities to impose fines of up to $1,000 a day on property owners who do not maintain vacant homes purchased in foreclosure, a tool aimed at preventing blight in hard-hit neighborhoods.
