Foreclosure Actions Downgrade Due to Emergency Laws

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The first new weapon in the battle against foreclosure actions has been announced by Governor Jerry Brown. The Governor of California has issued an executive order instructing each of the state’s 50 largest banks to begin preparation for the orderly liquidation of mortgage backed securities held by these banks. In the past, banks in California were able to postpone or even stop foreclosure proceedings for months while the foreclosure process proceeded in another county. This loophole in the foreclosure law allowed many homeowners to remain in their homes despite being behind in their payments. The new California plan, which begins the process of bank termination proceedings, will make it more difficult for borrowers to avoid foreclosure when the time comes.
|Foreclosure Actions Foreclosure Actions Downgrade Due to Emergency Laws

The first new weapon in the battle against foreclosure actions has been announced by Governor Jerry Brown. The Governor of California has issued an executive order instructing each of the state’s 50 largest banks to begin preparation for the orderly liquidation of mortgage backed securities held by these banks. In the past, banks in California were able to postpone or even stop foreclosure proceedings for months while the foreclosure process proceeded in another county. This loophole in the foreclosure law allowed many homeowners to remain in their homes despite being behind in their payments. The new California plan, which begins the process of bank termination proceedings, will make it more difficult for borrowers to avoid foreclosure when the time comes. Click here for more information about Phoenix bankruptcy attorney
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The purpose of the executive order signed by Governor Jerry Brown is to prevent banks from carrying out the illegal practice of selling residential real estate assets in lieu of cash. The practice has allowed banks to sell these homes for very little cash to investors without taking out any loan. Because the bank was not obtaining any loan through the sale of the property, the proceeds from the sale did not go towards the homeowner’s mortgage. In many cases, the bank has re-sold the property for the same price it paid to the investor, pocketing its profit and keeping the homeowner in their home. The new executive order is designed to prevent such activities from happening.

Under the new California foreclosure laws, lenders must give borrowers a chance to cure or exercise a right to cure a default before they are granted a foreclosure judgment. The lender must also inform the borrower of its rights to cure at least two months before it carries out its plans to foreclosure on the property. If the lender fails to cure, borrowers may have the option to enter into a deed in lieu of foreclosure in exchange for the release of the lien on the property. A deed in lieu of foreclosure allows the owner to return the house to the bank without going through the lengthy foreclosure process.

Brown’s executive order is in response to legislative efforts by California’s legislature to increase foreclosure sales in the state. California has the nation’s most expensive real estate markets. While the state does reduce its overall number of foreclosures, it does so by drastically reducing its number of evictions. Evictions account for about forty-nine percent of the homes in the state, making them one of the more difficult markets to manage. In recent years, California’s legislature has passed bills that make it easier for borrowers to escape foreclosure when they are facing financial difficulties. Although these bills are now law, many believe that the governor’s executive orders will further complicate the problem and make it even more difficult for borrowers to escape the clutches of lenders.

The current state of affairs has resulted in what the California attorney general called an “emergency department” solely dedicated to helping families in need during the course of their mortgage crisis. The state’s Department of Forestry and Wildlife has also taken steps to provide support for struggling homeowners and ranchers. In March, Governor Jerry Brown signed into law the “Foreclosure Assistance Act,” which provides financial aid for individuals who are experiencing difficulty making their mortgage payments or are behind on their payments and are unable to sell their property. As expected, many local and national groups have praised these new laws as a way to help those in need.

However, amidst the celebration in Sacramento, Brown’s administration issued an executive order preventing local courts from using their existing eviction procedures to issue judgments against homeowners. According to the order, courts will not be able to issue eviction notices “unless there is clear evidence of extreme and immediate threat to the safety and welfare of the individual.” The Los Angeles Times reported that this means “the only person protected from eviction by state courts will be the homeowner,” adding “so far, the courts have not been able to make that call.” In a related development, according to the Los Angeles Times, the California State Supreme Court “made clear that it is reviewing a decision that could sharply limit the powers of court employees in cases of urgent danger to a home.” It is unclear how the court will rule on the matter, but the court’s ruling could drastically limit the ability of bank officers to serve eviction notices in Los Angeles. The emergency laws were later reported to have been strongly opposed by the banking industry, who called the new measures “unnecessary, costly and counterproductive.”

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