Monday, June 15, 2009

California Foreclosure Prevention Act

In one of those efforts that means well but in the coming months we will probably see a far worse backlash, today California added 90 days to the period between the first defaulted payment and repossession through foreclosure, unless the servicing bank has a program in place for loan modification.

As history is playing out, banks are much more resilient toward any sort of loan modification than I would have guessed, based on general business sense that lowered loan payments are better than no loans payments and trying to sell the house in a saturated market. But as it happened, all government efforts to assist the process have failed. The original Hope For Homeowners Act was a bust, which followed a similar Bush plan that was also a bust. In that we need this sort of legislation, the more recent Obama plan must be struggling.

Where the mortgage markets are already starting to freeze, despite the Fed's efforts at quantitative easing to keep money flowing, a move like this can't make banks more likely to originate loans.

No comments: