The CA Senate’s Banking and Financial Institutions committee is meeting this afternoon to consider SB729. If ultimately passed and signed into law, this bill would have dramatic impact on how foreclosures are conducted in California.Key elements of this proposed change include:

• Requiring lenders to actively pursue a loan mod with the homeowner prior to starting a foreclosure.
• Homeowners would have the right to sue or void a foreclosure sale up to a year after the sale.

Critics of the bill state these measures would only prolong the housing crisis, preventing the housing market from starting to grow again. And the one year window after a foreclosure sale would be a severe legal deterrent to investors bidding at a sale, or the lender selling to a new homeowner, leaving foreclosed properties vacant for a year or more before that one year window expired. The idea of numerous vacant, foreclosed homes in local neighborhoods for over a year would be one potential unintended consequence of such a policy.

These proposed changes, if enacted, would be one of the most liberal (for the consumer) foreclosure procedures within the 50 states. Each state sets their own foreclosure rules. Some states require a court ordered foreclosure (judicial states). It’s in these judicial foreclosure states (ie, Florida) that the now famous “robo-signers” thrived.

In non-judicial foreclosure states (ie, California), the process is determined by statute. Non-judicial states use “Deeds of Trust” ( technically not “Mortgages” which are judicial) with the incredibly powerful words “with power of sale”. Those 4 words buried in the legalese is what gives the lender to foreclosure on a property.