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.

In Florida, there are currently over 40,000 homes in the preforeclosure state, and almost 60,000 in foreclosure. Add to that the 277,000 tax liens, and it is obvious that this is a significant issue in Florida, as well as the rest of the country. In Jacksonville, where I live, there are over 1,100 homes in foreclosure. While this is a devastating situation to many, it is the perfect opportunity for others to buy a home they could otherwise not afford. This is a reflection of life itself, really. One occurrence can mean ten different things to ten different people. The umpire who calls someone “out” at home brings joy to millions who swear his vision is absolutely impeccable, but to millions of others, science hasn’t invented eyeglasses thick and sophisticated enough to cure this man’s obvious physical impairment.

To those who now may be in a position to get the house of their dreams let me offer some education.

First off, the most popular method of mortgage foreclosure in Florida is judicial. This means the sale of the mortgaged property is under the supervision of a court. Proceeds then go first to satisfy the mortgage, second to other lien holders and, finally, the mortgagor/borrower if any proceeds are left. Like all other legal actions, all parties must be notified of the foreclosure. This could take six months or more from the time a property owner receives a notice of default until the property is sold at a public foreclosure auction sale. Please note that in order to keep costs down, you shouldn’t wait until the house becomes what is termed “Real Estate Owned” (REO) after the auction because the property will cost more than it would in preforeclosure. A property becomes REO when it remains the property of the owner of the mortgage. This can occur when the property was unable to attract reasonable auction bids, usually because the remaining mortgage balance is higher than the actual home value. Because of this, the owner/servicer will try to sell it through the standard real estate channels.

Purchasing directly from the bank is the most popular way to buy foreclosed homes because it is simpler and safer than other methods. There are several ways to find properties, but checking the county courthouse or going through the newspapers is a good start. Listing services and Realtors can also be very useful, depending on your level of expertise in this area. There are state-specific laws that govern foreclosures, and for Florida, you can find out more information by calling 1-800-342-1827.

Foreclosures can be a rite of passage, but education and preparation are the best ways to get the maximum possible benefit from this transition.

by Dan Padgug, owner of Padgug and Associates and ManageYourMortgage.org contributor

This is a recent email we received from a Citimortgage customer (NYSE:C)

Funny thing happened when I paid my mortgage payment on Wednesday.
I paid by phone, because i was unable to login to the website as I normally do. This month has bees financially difficult for us and our payment was 23 days late.

I expected a minimal late fee, and was planning to pay it.  I had recently received a notice in the mail regarding the lateness of the account with the breakdown of various fees and charges I was incurring by being late.

The late fee on my statement was $18.66.

The verbal late charge quoted from the customer service representative was $19.00.
When I pointed out the difference, he immediately launched into what seemed like a scripted apology.
“Oh, I’m actually testing a new system today, it has apparently rounded up on the late fee, which it shouldn’t do, I will report this to a supervisor. This shows you pay close attention to detail in your personal accounting, thank you for bringing this to our attention.”

I immediately apologized (I don’t know why) for nickel and diming Citimortgage, but also pointed out that if they got an extra .40 cents on each customer then they probably wouldn’t have anymore financial difficulties.

Think about that. An extra 40 cents on every customer that’s late on a payment right now.
For some reason a little red alarm starting blinking in my brain.  Not good.

Submitted by MYM User..no official response has been solicited