New California Foreclosure Legislation
Governor Jerry Brown signed new legislation on increasing protections for California homeowners facing the possibility of foreclosure. It prohibits lenders from starting the foreclosure process while a loan modification is being negotiated, a common problem I have seen with many of my clients. It also expands notice requirements as part of the foreclosure process and requires large institutions to give borrowers a single point of contact for dealing with their loan issues. Last but not least it gives borrowers opportunities to go to court if they are wrongly foreclosed upon and the bank does not correct the mistakes.
These are common problems many of my clients are facing. I have seen many circumstances in which a borrower is in the middle of a loan modification and actually makes payments only to see that their home was sold in a trustee sale the very next day. Although, the lenders will not be able to foreclose during the modification process once the modification is rejected they are able to do so.
A powerful tool to stop the foreclosure would be a Chapter 13 bankruptcy. Chapter 13 allows the borrower to develop a payment plan with the court to catch up on arrears (missed payments) and stop the foreclosure. Although, it does take careful planning Chapter 13 bankruptcy could save your home.
As an added benefit if you have an unsecured 2nd mortgage, a lien removal in a Chapter 13 can eliminate that mortgage and lien. This is commonly called lien stripping.