California State Regulators Seek Public Comment on Implementation of California Foreclosure Prevention Act (ABx2 7 and SBx2 7)

The California Department of Corporations, Financial Institutions and Real Estate has called for public comment on Regulations for the California Foreclosure Prevention Act.

This law, known to many in the industry by their bill numbers, ABx2 7 and SBx2 7, contains extensive provisions relating to the process of applying for the exemption from the 90-day rule, as well as re-applying or appealing a decision.

As summarized by Mike Belote, UTA’s California lobbyist, the bill, as signed into law adds;

• New Section 2923.52 to the Civil Code, adding 90 days to the existing 90 days which must elapse between the notice of default and the notice of sale, applicable to loans recorded between January 1, 2003 and January 1, 2008, representing first liens on owner-occupied principal residences on which NODs have been recorded;
  

• This same Section 2923.52 exempts from the 90-day provision loans on which the servicer has obtained an exemption from a state regulator. The standards for an exemption from the 90-day provision are laid out in new Section 2923.53. These standards are very detailed, but in general the servicer must have demonstrated the existence of a comprehensive loan modification program. The program must be designed to keep homeowners in their homes when the anticipated recovery under the modification program exceeds the recovery under foreclosure, and when the program targets a 38% debt-to-income ratio for borrowers. In order to reach the 38% standard, the program is to utilize some combination of interest rate reductions, term extensions, and principal reductions.

• All lenders are covered. State-chartered lenders are to apply for exemptions from the 90-day rule to their state regulators, while others (i.e. federally-chartered lenders) are to apply to the state Commissioner of Corporations;

• The bill requires the state regulators to develop regulations within 10 days after the effective date of the bills, and then gives lenders 14 days after the promulgation of regulations to for the provisions to become operative. Thus, it appears that the actual implementation of the bill will be delayed until early June (90 days after the adjournment of the special session, plus 10 days to promulgate regulations, plus 14 days after that date);

Comments must be submitted by May 6, 2009. Members who have comments should send their comments to UTA Counsel Phil Adleson, who will submit comments on behalf of UTA.

Read the draft invitation for Comments on Regulations
Read the Draft Regulations
Read the Foreclosure Prevention Loan Modification Data Report Form
Read the bill as approved

Comments must be received by May 6, 2009