The rules that govern how a lender can foreclose on a California property have changes as a result of Governor Schwarzenegger’s signing Senate Bill 1137 into law. It is important for homeowners to understand their rights under SB 1137. Here is a summary of the new rules:

The bill applies only to loans funded between January 1, 2003 to December 31, 2007 and is in effect until September 8, 2008. A Notice of Default cannot be filed until 30 days after a contact is made with the borrower either in person or by telephone to assess a borrowers option to avoid foreclosure. The borrower has the right to request another meeting within 14 days. Robert G. Scurrah of Consumer Debt Advocate Law Center ( www.cdalawcenter.com ) states: “Unfortunately, this disclosure of financial information will actually serve to hurt the consumer’s chances of getting payment relief through a loan modification. The lender’s have very strict guidelines, and unless you understand those guidelines and can present you financials in a way the lender is receptive to them, you may permanently disqualify yourself from receiving a loan modification from the lender. This is especially true with banks like Wells Fargo or Countrywide Home Loans who seem to be going out of their way to be non-receptive to loan modification despite taking TARP money from the taxpayers based on our experience.”

Additionally, if a Notice of Default is filed, it must include a declaration that the lender or authorized agent contacted the borrower, or the borrower surrendered the property. A borrower may designate a HUD-certified Counseling agency, or preferably an licensed Attorney to discuss with the lender or authorized agent on his or her behalf, options to avoid foreclosure. Any modification or workout plan must be approved by the borrower, so retaining an attorney is advised to ensure the borrower’s rights are protected.

A Notice of Default may be filed when the borrower has not been contacted, only if due diligence has been done by the lender to try and contact the borrower. Further, a lender or authorized agent must provide a means for the borrower to contact them in a timely manner, including a toll-free number that connects to a live operator. If the lender has a website, information must be posted to assist borrowers in avoiding foreclosure.

Tenants or subtenants living in a rental housing must be given 60 days notice before they can be evicted if the foreclosure occurs.