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~IMPORTANT FOR ALL CALIFORNIANS~ California Senate Bill 1137 asserts that the situation with foreclosures is so critical

that to preserve our Constitutional Rights Lenders must modify loans for homeowners where foreclosure or short sale will bring less funds. In other words modifications can be insisted upon where needed, so long as the principal balance isn't reduced below what the lender will get in Foreclosure!! SEC. 10. (a) This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to stabilize and protect the state and local economies and housing market at the earliest possible time, it is necessary for this act to take effect immediately. Senate Bill 1137 adds Section 2923.6 to the Civil Code to detail this further: 2923.6. (a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interests of all parties if it agrees to or implements a loan modification or workout plan for which both of the following apply: (1) The loan is in payment default, or payment default is reasonably foreseeable. (2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis. (b) It is the intent of the Legislature that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority. (c) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date. What this means is that if you find you are unable to pay your loan, the lender must see if you can qualify for a loan modification, even if this necessitates reduction in principal amount, but not more than the amount it would receive if it were to foreclose on the property. The amount it would receive if it were to foreclose on the property is estimable by going to and putting in your address and taking that figure (rough estimate and probably a bit high for this market – of what you property is worth if sold today), then multiply that figure by 4.5% and deduct that amount (roughly the cost of

foreclosure). This is generally agreed to be compliant with this section. To determine how much you are ABLE to pay, lenders are considered reasonable if they have a maximum of 40% of PITI/Gross Income. Ref. Wikipedia: In relation to a mortgage, PITI (pronounced like the word "pity") is an acronym for a mortgage payment that is the sum of monthly principal, interest, taxes, and insurance. Lenders will also look at the Total Debt to Income Ratio. As of November 08 the maximum for this is 45% for unstable neighborhoods and 55% when neighborhood is stable, credit score is 660 or greater and value of home is no more than $417,000. Why is this important? Remember above, it must be consistent with the lenders authority – so must play by their rules and the best way to determine these is to look at their current underwriting guidelines. For example: If you have a home with a loan of $700,000, that has a current market value per Zillow of $500,000 and your monthly gross income is $5,500 then the lender would minimally have to approve a loan modification where the total Principal, Interest, Taxes and Insurance is $2,200. The lender can do this by lowering the interest, increasing the mortgage to 40 year, lowering the principal or all three, but the borrower must agree to these terms and this isn’t just a one sided deal. If the borrower feels the terms aren’t aggressive enough, i.e. the interest has been lowered for three years to 2% but he needs this to be fixed at 2% or lower the principal, this must be accommodated up to the point that the principal reduction has lowered no further than $477,500 (the Current Market Value of $500,000 less 4.5% estimate for foreclosure costs). This law is not dependent upon the new Hope For Homeowners (H4H) program signed into law October 1, 2008. The intention of this legislation was to offer another alternative to foreclosure than a huge government bailout program. This legislation makes it strictly the lenders legal obligation to ensure this happens when requested, not a voluntary program and is the most aggressive program I have heard of in the US at this point. The intention of this is that all people in the State who qualify for this get this rather than allow their property foreclose. It does not require that you be in default, but does require that default is imminent. But this Civil Code assistance isn't available to those people in the following categories: (h) Subdivisions (a), (c), and (g) shall not apply if any of the following occurs:

(1) The borrower has surrendered the property as evidenced by either a letter confirming the surrender or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent. (2) The borrower has contracted with an organization, person, or entity whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process and avoid their contractual obligations to mortgagees or beneficiaries. (3) The borrower has filed for bankruptcy, and the proceedings have not been finalized