California Foreclosure Prevention Act (CFPA) in a nutshell!

I know a few people have been asking for the nuts and bolts of the new CFPA. I have taken snippets from a couple different resources and have included them below for your convenience. Hope this helps!

The California Foreclosure Prevention Act was enacted by the state Legislature, and signed by Governor Arnold Schwarzenegger on February 20, 2009 and put into effect today, June 15th, 2009.

The Act, which amends the California Civil Code as it relates to residential mortgage loans,states it's goal of allowing "additional time for borrowers to work out loan modifications while providing an exemption for mortgage loan servicers that have implemented a comprehensive loan modification program."

New Civil Code Section 2923.52 will add 90 days to the existing 3-month statutory waiting period between the recording of the notice of default and the giving of the notice of sale. Loans that are covered by the new legislation must meet four conditions:

(1) the loan must have been recorded during the January 1, 2003-January 1, 2008 (inclusive) period, and must be secured by residential real property
(2) the loan must be a first mortgage or deed of trust
(3) the borrower must have occupied the property as his/her principal residence at the time the loan became delinquent
(4) a notice of default must have been recorded against the property.


There is also an applied-for exception to the 90-day moratorium at new Civil Code Section 2923.53. Servicers may apply for an exemption order issued by the relevant "commissioner." The "commissioner" means the Commissioner of Corporations, the Commissioner of Financial Institutions, or the Real Estate Commissioner, as applicable. The law effectively provides that national banks, federal savings banks, and their respective operating subsidiaries will submit applications for exemption to the Commissioner of Corporations.

What does a comprehensive modification program entail???

To be "comprehensive," the loan modification program must have four key features:

First, it must be intended to keep borrowers in their homes when the anticipated recovery under the loan modification "exceeds" the anticipated recovery through foreclosure on a "net present value basis."

Second, the program "targets" a housing-related debt-to¬gross-income ratio of 38% or less on an aggregate basis (i.e., based on all of the servicer's loans under the program; this ratio need not be achieved for each individual loan).

Third, the program includes "some combination" of the following: (a) reducing the interest rate for at least five years; (b) extending the amortization period up to 40 years from the original date; (c) deferral of some unpaid principal until loan maturity; (d) reducing the principal; (e) compliance with a federally mandated loan modification program (note - the federal program must be mandated, not optional); and (f) "other factors" that the commissioner determines are appropriate.

Fourth, the program seeks to achieve "long-term sustainability" (which is not a defined term) for the borrower. For the target 38% ratio, the borrower's housing-related debts include loan principal, interest, property taxes, certain housing-related insurance, and homeowner association fees.

I obtained this information from the CA DRE website as well as Morrison / Foerester Legal Website.

http://www.jdsupra.com/post/documentViewer.aspx?fid=f677dfdf-7680-42bc-841f-2af16d3ec8df


Hope this helps answer some questions. There are still some unanswered questions that remain to be answered....

Please let me know if you have further questions and I will forward the research I have done on the CFPA.

Thanks!

Sara Ard
Prestige Real Estate Services
Sara@Prestige-RES.com
619-365-9328