Industry NewsMortgage

California may expand protections for distressed borrowers

Lenders would have to consider workouts before foreclosing on most loans

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California lawmakers may expand the pool of homeowners afforded protection under an existing state law that requires lenders to contact distressed homeowners and consider them for a loan modification before beginning foreclosures proceedings.The existing law applies only to homeowners who took out a mortgage during a five-year window, between Jan. 1, 2003 and Dec. 31, 2007.SB 1275, which was approved by the state Senate in 21-12 vote Thursday, would extend that protection to borrowers who took out a mortgage before Jan. 1, 2009, if their loan is subject to review under the federal Home Affordable Modification Program (HAMP).Lenders would also be required to contact borrowers and consider loan modifications before beginning foreclosure proceedings on any loan taken out between Jan. 1, 2003 and Jan. 1, 2009, regardless of whether such a review is required under HAMP.Because 25 to 30 percent of loans are not subject to HAMP, the bill would widen the pool of borrowers who are afforded such...