A bill requiring lenders to delay foreclosure until homeowners are fully considered for a loan modification was rejected in the state Assembly on August 30, 2010.
Many delinquent homeowners have fallen victim to a trustee’s foreclosure sale while they are in the process of negotiating a loan modification with the foreclosing lender. Senate Bill 1275, if it had passed, would have given homeowners the right to sue a lender who completed foreclosure before negotiations were considered.
Data gathered by the state shows that one in ten California homeowners is 60 or more days delinquent on their mortgage — roughly 700,000 homeowners. 35% — roughly 2,500,000 — California homeowners are upside-down.
While the federal mortgage protection regulations prevent participating lenders from foreclosing on homeowners negotiating a modification, the rule is voluntary and thus unenforceable. Lenders argued the legislation would unfairly delay foreclosure for those homeowners who do not qualify for a loan modification.
first tuesday take: At first tuesday we rarely address the gossip of Sacramento bill creation and the political legislative process; only the results of bills passed. However, with this bill rejection, the real estate recovery was dealt a major setback. Even if the regulation would have reduced fees for brokers and agents (due to modification which keeps the property off the market), brokers and agents should have been all over this one to help right the real estate market, keep owners in their homes and prevent lender deception by stalling on loan modification consideration when proceeding to a trustee’s sale.
Sacramento was blinded by the political donor weight of big banks when they rejected a bill that would have held lenders accountable for inefficient processing time and lack of organization. Lenders lull homeowners into the belief that modification is possible when a foreclosure sale was their underlying goal all along.
Once again, lenders show distaste for any challenge to their authority — regardless of how rational the bill’s regulations would have been. Despite having the largest share of the blame for the crisis on their shoulders, lenders remain unwilling to do their part to help fix it with modification programs that are realistic (i.e. principal balance reductions to a loan-to-value (LTV) ratio of 94% of the home’s value). Also, the “too big to fail” mentality protects them, and leaves them unregulated.
The bottom line? Lenders make modification decisions based on which course of action will produce the greatest net present value (NPV), or worth in “today’s” dollars. The formula is simple. Determining who does or does not qualify for a modification based on this NPV or the alternative of short sale, foreclosure or deed in lieu does not require months of stringing along a homeowner in distress. They just need to consider it with the homeowner as though in mediation of a dispute. Harmless stuff by any standard.
Brokers, agents and the public must continue to put pressure on lenders to ramp up their cooperation and participation in this recovery since they will never do so on their own recognizance. They much prefer the response taken by Japan and Mexico in their 1990s financial crises.
Re: “Assembly rejects foreclosure/modification bill” from the San Francisco Chronicle
If the government chose to forgo or dramatically reduce capital gain taxes in the sale of real property, real property owners struggling to stay financially afloat and others invested in real property would be more able and willing to sell their properties in the currently depressed market. This scenario would allow many more people in the core “middle class” of our economy options to free up equity, ultimately putting more liquidity in the hands of those most apt to spend that that cash on goods and services or other investments. Spending in the middle core of our population is what drives our economy.
Ron B. You should puclish your findings so ll of us can be amde aware of the information taht you ahve oncovered about banks.
I have been a victim of one of these modification companies that was handling my paper work and never got it through. In the process lost my house!
Thanks
Along with the comments of Ronald and Gary, I have studied the banking system for the past 14 months, and I do not have enough space or time to explain all the derogatory information I have uncovered. More and more mister “average american citizen” is studying the Constitution and Common Law, and finding out what their “real” rights are, the very things the banks don’t want most people to know.
If anyone has any questions of me regarding my comment, feel free to contact me directly. My contact number is 707-328-1241, should First Tuesday allow this to be publicized.
WHAT????? So on one hand the lenders kick the borrowers out and HOLD the properties in inventory, releasing them slowly???? Well that is artificially holding the price Bad for new buyers. AND the other hand all the 2.5 million to 10 million families who got screwed out of their homes?????? CHASE BANK are you listening??? I WILL NEVER DO Business with you crooks…… Yup lost a rental while they messed around passing the file from dept to dept.
I agree with Ronald and the author, however I still see a larger picture. If, (as we in real estate believe) real estate is a major, if not the driving force in this nations economy, why are the banks holding back their REO inventory? I understand that if this inventory were to be released all at once, it would crush the market, but, on a timed release we could turn around our markets and our economy at a faster rate than I forsee in the near and far future. I know that a decent property priced at market gets multiple offers within a few short hours of listing. For example 32 offers in 10 days on a $165,000 MV house. Because all these buyers have a pre-approval, that says to me, 32 sales possible. Based on conversations with other agents, this happens over and over and is not an isolated incident. Am I seeing through rose colored glasses, I don’t think so. What do you think?
It never ceases to amaze me how inept the California Legislature is. Californians need to wake up and vote these people out of office. Government in general in this state remind us of Washington DC. Nothing gets done and the citizens suffer for it. The Lenders get bailed out and main street Middle Class America suffers for it. The politicians position is.” It doesn’t affect me”! Lenders have the doe, money talks. A very sad testament.