How have foreclosure laws changed in the last 8 yrs

Question

I've been out of the game for nearly 8 years and would like to know what has changed in terms of buying pre-foreclosures in California. Specifically subject to and short sales.

Both from a legal prospective as well as what you may be experiencing in today's So Cal market. Thanks in advance.

Ron S. · Answer

The laws today are unrecognizable from 8 years ago. Federal oversight that didn't exist 8 years ago and trumps any state law, where it is more restrictive. As an investor, the opportunities exist the same today as they did then, for short sales (I can't speak to subject to) but the competition is better educated and informed, as is the consumer. As a guy that was in the crash of the late 90's as well as the crash of 08' and in the banking industry, I can say at least from my perspective that it's a different world and in my opinion, one for the better as far as laws and regulations go. Yes, we are regulated to the point of ridiculousness and to the point where it can be cost prohibitive to be compliant but, the protections afforded to the consumer are for the betterment of everyone and, it really weeds out the used car salesmen and boiler room operators that prey on consumers.

Angel P. · Answer

Thanks @Ron. And actually my question was directed to you since you're also in CA but I somehow mixed up your guy's names. Thanks for answering it anyway.

Ron S. · Answer

While your question was directed at Bill, I'd start with the CFPB. www.consumerfinance.gov. That will cover the federal rules. Then, go to your state's website to get the state rules. Since you are in California, i'd start with http://www.courts.ca.gov/1048.htm. California is unique (As are some other states) in that the state laws are often more restrictive than the federal laws. As an example, California has the "One Action" rule against deficiency. Happy reading.

Angel P. · Answer

Thanks guys. @Bill are there any links or sites you would recommend to catch up on these regulations?

Ron S. · Answer

@Bill - There are no mortgage workout requirements on a Federal level. There are requirements that if you have a modification program, you solicit the borrower for one and provide them time to return a complete package before you can commence or continue with foreclosure (End of dual tracking) but, there are no workout requirements. What I mean is, you are not requied to offer the borrower a workout unless you have a workout program and the borrower is qualified for a workout. There is no 6 month requirement before you can start foreclosure. There is a 4 month requirement. (Check CFPB regulations on the commencement of foreclosure). Short sales allow anything a lender will allow. There are no Federal prohibitions on the borrower's side as far as benefitting is concerned. Not sure what you are trying to say here. Inteferring with an insured bank is a Federal offense? Define interference. Tactics to prolong foreclosure is NOT a Federal matter. There is nothing regarding prolonging foreclosures OTHER than that the lender/servicer is not required to work with a borrower that uses tactics to delay or stall a foreclosure. It's not new that some banks write off losses. Banks have been required to write off losses since FASB and GAAP rules were developed! Not foreclosing is not new either. It's a business decision and sometimes a local or state agency that stops or stalls the lender from foreclosing and sometimes, it's not in the lender's best interest to foreclose but that's nothing new. The vollume may be new but not the tactic.

Bill Gulley · Answer

Federal laws, more specifically;Mortgage work out requirements for modificationsServicing records and requirements for collections6 month waiting periods to begin foreclosuretenant protections allowing 6 months occupancy for valid leases, has been amendedshort sales allow only moving or other minor costs to a borrower, they may not benefitborrowers in FC may not be contacted except by qualified parties as to foreclosure helpinterfering with an insured bank in a foreclosure is a federal offenseTactics to prolong foreclosures, like filing a silent second is a federal matterSome banks simply write off the loss and don't foreclose...that's new!Compensation may be allowed to borrowers who got skinned in sub-prime loansNew compliance requirements for lenders, in origination, modification, servicing, compensation, servicing and property retentionGee, I think that pretty much covers it, besides the state requirements. You have a lot of catching up to do! :)