21 Sep New California â€œWorkoutâ€ Legislation
Last week, my colleague Michael Doan, wrote an interesting post about new California legislation, Civil Code Â§2923.6. This is good legislation for home owners â€“ as Michael points out the mortgage companies must now comply with several sections of this code to work with a homeowner to refinance or avoid foreclosure.
Michaelâ€™s post suggests that mortgage companies must work out a refinance or loan modification. I donâ€™t think the statute is that clear. Although the intent is there to encourage a workout, it seems to me that there is sufficient â€œwiggle roomâ€ to allow the mortgage company to avoid having to do that.
Section 2963.6(a) states:â€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.â€ Frankly, I doubt that when push comes to shove we wonâ€™t find that there is some â€œcontractual or other authorityâ€ that allows the avoidance of a meaningful workout plan.
The law is brand new having gone into effect two weeks ago. Weâ€™ll just have to wait and see how California courts interpret this law. I, for one, hope Michael is right, though I fear otherwise.
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