The bill, which has been approved by the California Senate, is designed to help stem the home foreclosures by requiring lenders to give homeowners a earlier warning that they are entering in to default. It is hoped that this will allow homeowners and lenders to work out a new deal, rather than rush to foreclose on the property. 

The California Foreclosure Bill, officially called SB1137, will also require banks and lenders to maintain properties that have been foreclosed on and are sitting empty.

Senator Don Perata authored the bill, say that the bill “is an important piece of the puzzle of how to best protect California homeowners and communities from the fallout from the nation’s mortgage crisis.”

Opinion: California Foreclosure Bill Won’t Help

The foreclosure bills being proposed by California are a typical reaction in a bear market. Regulators rushing to pass bills to alter behavior is natural when negative mood sets in. (Read Bear Market Psychology at its Finest.)

While a small percentage of foreclosures may be the result of not having enough time for the homeowner and lender to talk, the majority are because the banks have over-extended themselves and face massive sub prime losses. They only want to lend to prime borrowers. Global credit contraction is the issue here…not a lack of negotiation.