The California Foreclosure Prevention Act goes into effect today, according to this AP article at Mercury News. Under this law, foreclosures in California are halted for 90 days. The plan is similar to the Making Home Affordable Program that the national government implemented in March. The idea behind it is to encourage loan companies and lenders to do everything they can to keep people in their homes and try to modify existing loans before jumping into the foreclosure option. After all, California has seen 365,000 foreclosures in just two years, with more pending.

On the surface, this sounds like an admirable plan: make the lenders and borrowers work together to prevent foreclosure and keep homeowners in their homes. But according to this real estate blog in Contra Costa, there are loopholes to this law, just like any other. Many lenders will doubtless try to maintain that they are exempt from the restrictions of the law for varying reasons. Another effect of the law, according to this real estate blogger in Sacramento, is that some short sales were pushed through quickly before the law took effect. The reasoning behind that was to recoup ANY funds possible before the moratorium made a quick foreclosure and resale impossible. The blogger wonders whether this new law will have a similar effect on other short sale situations.

Overall, though, the spirit of the law is good, and hopefully it will ease some of the pressure for troubled homeowners in California.