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| California Foreclosure Prevention Act effective May 2009 |
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QUESTION: What are the benefits under the California Foreclosure Prevention Act (CFPA)?
Answer: The CFPA is a new law that may preclude a foreclosure sale for an additional 90 days beyond the current law requirements in order to allow the borrower and lender to pursue loan modification.
Question: What is the purpose of the law?
Answer: The purpose of the law is to allow the borrower and lender some time to work out a plan to avoid foreclosure which may include loan modification. If you have a notice of default, it is advisable to contact an attorney immediately to avail of this new law and to pursue loan modification.
Question: What are the possible changes in the terms of the loan if modified?
Answer: Depending on the bank and your particular situation the following are the possible but not guaranteed changes:
Reduction in interest rate from 3% to 5.5%.
Extended life of the loan from 30 to 40 years.
Conversion to fixed rate loan. Reduction in principal amount.
Lowering of monthly payments.
Question: What is the timeline for a California foreclosure under the existing law before CFPA?
Answer: Under the existing law, once a Notice of Default has been recorded in the County Recorder’s Office, the borrower has a 90 day period of redemption.
If not redeemed, the lender will publish the foreclosure date within 20 days after the 90 day redemption period has elapsed. Thereafter the lender may foreclose in 21 days after publication. Hence, under current law there is a minimum of 111 days from date the Notice of Default is recorded to foreclosure date. With the new law, an extra 90 days will be added to the 111 days making it a total of 201 days from the date Notice of Default is recorded to auction date.
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