Assembly Bill 1639, the California Foreclosure Mediation bill would establish the Facilitated Mortgage Workout (FMW) program. Through it, lenders are required to meet with borrowers to develop a modification plan before foreclosure. The loan must have originated before Jan. 1, 2009, and the home must be occupied by the borrower as a principal residence. The principal balance on the mortgage cannot exceed $729,750.
California also passed Senate Bill (SB) 1275, which requires mortgage servicers to notify borrowers of a right to seek options that would avoid foreclosure and attach an application for a loan modification or other alternatives before issuing a notice of default (NOD). Also before filing an NOD, servicers must evaluate a borrower who submits a written request for a loan modification. For those denied one, a separate letter must be mailed to the borrower informing them of the denial and reasons why.
“This legislation sends a strong message to the banking and mortgage industry — that business as usual is not working. We will force the industry to do more to help struggling California families facing foreclosure,” Nava said. “This legislation will require face to face meetings between homeowners and their lenders—so that a mutually acceptable plan can be implemented that keeps families in their home.”
Like Nevada’s Foreclosure Mediation Law AB 149, the California bill also requires lenders to include information regarding the program with the notice of default. The borrower must return a form to the administrator of the program requesting a mediation within 30 calendar days of receiving the notice of default and must send other information with 15 days of the request.
Unlike Nevada’s program, in California, borrowers must deposit with the administrator of the program 50% of the current mortgage payment each month while he or she participates in the FMW program.
