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| Pre-foreclosure requirements in California |
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BORROWERS who are late in payments and seeking loan modifications are given by California Law SB 1137, the ammunition to discuss with their lenders their financial situation to avoid foreclosure. Lenders may file a Notice of Default and start foreclosure process if the borrower is late in payments.
Question: What are the requirements in California before a Notice of Default is filed?
Answer: California law requires all lenders who will foreclose loans made between 2003 and 2008, must at least 30 days prior to filing a notice of default to:
Contact the borrower in person or by phone to assess the borrower’s financial situation and explore options in avoiding foreclosure.
The lender must send a letter advising the borrower of their rights to request a meeting in person with the lender within 14 days, and must provide a toll free numbers for a HUD certified counseling agency.
The lender cannot initiate foreclosure until at least 30 days after contact with the borrower or 30 days following a diligent effort to contact the borrower. Diligence in this case means mailing a notice which includes the lender’s toll free number, followed by three phone calls on three different days at three different hours, followed by certified letter return receipt requested.
Question: Who are exempted under the above rules?
Answer: This law does not apply if the borrower has already filed for bankruptcy, has surrendered the home, or has contacted a person or entity whose primary business is advising those who have decided to leave their home, how to extend the foreclosure process and avoid their contractual obligations.
Question: What is one of the best options for a borrower to keep his or her home?
Answer: Loan modification is an option where a borrower can explain his financial situation to the lender and request reduction in interest rate, extension of the loan term from 30 to 40 years and reduction in principal obligation.
Question: May a homeowner do the modification request himself?
Answer: Yes. Most borrowers who are doing modification themselves find it hard to get through the lender. In many cases they are just given limited reduction in interest rates. There is an advantage of hiring an attorney to do the modification request. Loan modification is a legal process and there are benefits in the negotiation skills of the attorney. The attorney can point our possible violations of lenders under the Real Estate and Settlement Procedures Act and the Truth in Lending Act. These possible violations may give the borrower better deals with the lender to avoid possible litigation.
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