Lots of calls today from folks wanting the scoop on the "new moratorium" here in California. Seems that some have misinterpreted the new law and believe that it may have a big impact.

The new law adds 90 days to the existing 3 months between the filing of a notice of default and a notice of trustee sale, but exempts servicers (lenders) who put in place a loan modification program.

Overall the law makes little sense to me. Why our legislators are pushing lenders so hard to lockvhomeowners in a prison of debt and delay the inevitable is beyond me, but much like SB1137 last year, they are once again back at it with another attempt to force loan mods that I believe will again fail to make any real difference.

We expect most lenders have at least applied for an exemption from this law by submitting their loan mod program. As such we expect no immediate change in foreclosure activity. Even if the state gets tough and denies the servicers application for the exemption, those servicers have a chance to resubmit, and the mortatorium still won't apply to them for 30 days after the denial.

The moratorium also applies only to owner occupied ifrst mortgages made between 2003 and 2007, though that is the majority of foreclosures we see today.

Bottom line - if we see any impact at all it likely won't be until August or September. But these payment based loan mods are largely better for servicers than homeowners, so I can't imagine that servicers won't at least put a program in place. We will of course keep an eye on it.

For the complete details see the bill itself: http://leginfo.ca.gov/pub/09-10/bill/asm/ab_0001-0050/abx2_7_bill_20090220_chaptered.pdf

According to the latest report from the Mortgage Bankers Association a stunning 12 percent of homeowners with a mortgage are now at least one payment behind. Given the nationwide estimate that 25 percent of homeowners with a mortgage are now underwater this really shouldn't come as a huge surprise - but it is a stunning number in historical terms in any case.

What is actually MOST surprising to me is that anyone still thinks we have a "foreclosure problem" at all. Or that lenders are "aggressively foreclosing". Shoot, let's be realistic, we have almost no foreclosures in comparison to the number of folks that are not making their payment, and even fewer in comparison to the number of folks that are now seriously upside down in their home and essentially stuck in a prison of debt.

So the next time you see a reporter talking about the "foreclosure problem", or are at the other end of an ACORN bullhorn, let them know that we actually have an unbelievably low number of foreclosures given how many homeowners are upside down and not making their payments. And then politely suggest they are focused on the wrong problem and have completely missed the bigger picture - $4 Trillion in excess mortgage debt.

Last of a nine-part series.

I appreciate your giving me a bit of your time to read my views on the current economic crisis and how I think we should fix it. While my views are my own, I should say that I’ve had some wonderful influences, not least of which has been my friend Eric Janszen, founder of iTulip.com. His near-perfect foresight on much of what we have seen unfold has helped me not only understand the bigger picture surrounding this crisis, but also stay a step ahead financially. Without his guidance, I would not have had the wherewithal to self-fund ForeclosureRadar.com. I’ve also been fortunate to talk to many leading economists, fund managers and other insiders, thanks to our having truly great and sought-after data on the foreclosure market.

Despite the pain this crisis has afflicted on a great many people and my gloomy overall assessment on where we are in this crisis and what it will take to recover, I remain very bullish on the U.S. and hard-hit California in particular. Despite its flaws, I love where I live. As a businessperson, investor and citizen, I see the forest of opportunity beyond the trees.

As home prices continue to descend back to affordable and sustainable levels with a dash of spring in the air, its hard to dwell on the negatives too long without doing what we American’s do best – dust off the doom and gloom, look at the bright side and get back in the saddle.

Hopefully, we’ll soon find the leadership to put this failure behind us and ultimately realize what a beautiful gift we’ve been given, a chance to see that the course we were on wasn't sustainable. It’s time to begin living within our means, individually, in business and at all levels of government. It’s time to re-evaluate our priorities and realize that a better life cannot be financed – it just has to be lived.

Thanks again for your time and support.

Thanks to U.S. Senate Bill 896, the "Helping Families Save Their Homes Act of 2009", as amended with Senate Amendment 1036, the "Protecting Tenants at Foreclosure Act of 2009", tenants are now entitled to stay through the end of their lease, and receive 90 days notice prior to eviction after a foreclosure through out the country. In California this supercedes the 60 days that went into affect with CA Senate Bill 1137 last year.

For those of you buying at the auction it is more important then ever to verify occupancy if at all possible prior to making your purchase unless you are prepared to be stuck with a rental for an extended period. Depending on your MLS you may be able to lookup the rental (if it was listed by a Realtor) to find out if is was advertised as a lease or month-to-month rental. If you do happen to buy one with an extended lease don't forget that you can still try to negotiate cash-4-keys, and in the worst case you are at least entitled to the rent.

The text of the amendment can be found below, as well as the links above:

   SA 1036. Mr. KERRY (for himself, Mrs. Gillibrand, Mr. Reid, Mr. Dodd, and Mr. Kennedy) submitted an amendment intended to be proposed to amendment SA 1018 submitted by Mr. Dodd (for himself and Mr. Shelby) to the bill S. 896, to prevent mortgage foreclosures and enhance mortgage credit availability; which was ordered to lie on the table; as follows:

    At the end of the amendment, add the following:

TITLE V--PROTECTING TENANTS AT FORECLOSURE ACT

   SEC. 501. SHORT TITLE.

    This title may be cited as the ``Protecting Tenants at Foreclosure Act of 2009''.

   SEC. 502. EFFECT OF FORECLOSURE ON PREEXISTING TENANCY.

    (a) In General.--In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure pursuant to the foreclosure shall assume such interest subject to--

    (1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

    (2) the rights of any bona fide tenant, as of the date of such notice of foreclosure--

    (A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

    (B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1), except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.

    (b) Bona Fide Lease or Tenancy.--For purposes of this section, a lease or tenancy shall be considered bona fide only if--

    (1) the mortgagor under the contract is not the tenant;

    (2) the lease or tenancy was the result of an arms-length transaction; or

    (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.

    (c) Definition.--For purposes of this section, the term ``federally-related mortgage loan'' has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

   SEC. 503. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES.

    Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended--

    (1) by inserting before the semi-colon in subparagraph (C) the following: ``and in the case of an owner who is an immediate successor in interest pursuant to foreclosure--

    ``(i) during the initial term of the lease vacating the property prior to sale shall not constitute other good cause; and

    ``(ii) in subsequent lease terms, vacating the property prior to sale may constitute good cause if the property is unmarketable while occupied, or if such owner will occupy the unit as a primary residence''; and

    (2) by inserting at the end of subparagraph (F) the following: ``In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer time periods or other additional protections for tenants.''.

   SEC. 504. SUNSET.

    This title, and any amendments made by this title are repealed, and the requirements under this title shall terminate, on December 31, 2012.

Part eight of a nine-part series.

The housing bubble has caused enormous problems in the U.S. economy. To make sure this crisis doesn't recur, we should:

• Require income-based appraisals for lending purposes. Home prices should be able to rise as high as buyers are willing to bid, but loans based on federally insured deposits or reserves should be limited to amounts that are reasonably supported by local-area incomes. Private lenders should be allowed to lend as far beyond that as they desire, but only with limited recourse against the borrower and without taxpayer support for losses since such support creates a clear incentive to lend incautiously.
• Avoid government actions that support artificially low interest rates. Recessions are okay; they clean out the dead wood and keep everyone honest. Interest rate stability should be a higher priority then non-stop increases in the U.S. gross domestic product (GDP) so individuals--especially retirees--and companies can earn reasonable returns on their investments. This fix is more important than ever since a massive wave of Baby Boomers is about to retire.
• Shine the light of day on credit default swaps. Create a market so these instruments can be valued. Require those valuations to be disclosed so investors can evaluate the risk of investing in companies like AIG. Then let those investors bear that risk alone without taxpayers' backing.
• Bring back key regulations that were lost in the last decade. It may not make sense to completely repeal the Commodity Futures Modernization Act, Financial Services Modernization Act and Taxpayer’s Relief Act, but clearly these acts went too far. Certainly, there are ways to allow the creation of innovative new financial products without placing the full risk of those innovations on the backs of depositors' and taxpayers'.
• Limit new housing permits to a rate that's supported by reasonable projections of population growth. Counties also should require that the size and anticipated cost of approved new housing generally match local-area incomes. One way to achieve that objective would be to limit the supply of new housing separately for each income quartile.
• Make sure no financial institution is ever “too big too fail.” Risk of failure ultimately makes companies stronger and none should be above it, especially at the expense of taxpayers, who were largely left out of the gains. Though I believe it is unavoidable this time, we should work to never again privatize profits and socialize losses.

Next: Wrapping it up