California extends foreclosure moratorium
June 16th, 2009 Categories: Real Estate News, San Diego county Real Estate News
SAN DIEGO- In February the California Legislature passed a law extending the foreclosure 
moratorium in our state for an additional 90 days starting Monday 6/15.
The biggest flaw with continuing these moratoriums is we need to flush this inventory now. Continuing to push the negative consequences of foreclosures in to the future is not a solution and often times can actually make a borrowers situation worse. Additionally, it can create the appearance of a much healthier, while false, economy that citizens then base financial situations on.
Still, some borrowers who are currently talking to their mortgage companies are also likely to wind up in foreclosure once their files are reviewed. "We are getting so many of these cases where people don’t fit the new [Obama] program," says Michael Thompson, director of Iowa Mediation Service, which works with troubled borrowers. Many borrowers are unemployed or underemployed or have credit problems that go well beyond their mortgage troubles, he says.
Many have been "playing for time" while the moratoriums have been in place, he says. But the delays have only increased the amount of interest and fees they owe, making their loans "nonviable in the long run."- Wall Street Journal online, 4/15/2009*
Another negative impact of this moratorium is at a time when buyer activity is high because of low
interest rates, the market inventory in San Diego county is back to what is considered healthy at approximately 6 months. If the banks were allowed to continue the foreclosure process I think it is fairly safe to presume, based on what I am already seeing, that we would be able to continue to clear quite a bit of inventory. I have searches set up that 3-4 months ago saw 5-8 new listings a week. Those same searches sometimes are not seeing any new listings for a couple weeks in a row keeping those buyers on the sidelines.
Lastly, imposing these moratoriums can create a false profit for the banks and mortgage 
companies, which then report better earnings. These false earning reports in turn buoys the stock market creating an environment where everything is rosy. Again, these things would be great for our economy if they were not created artificially.
“The moratoriums "have to some degree postponed the realization of problems" and "may help bank earnings in the first quarter" by delaying charge-offs of some troubled loans, he says.” *
Probably the most ironic part of all of the legislation passed in California is that loans backed by the state do not fall under the moratorium.
The California Foreclosure Prevention Act law applies to first mortgages taken out between 2003 and 2007 for owner-occupied homes. CalHFA loans are not eligible.
If you have a loan backed by the state of California, so sorry, we need the money and you’re done!!!
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