The State of California holds the number one spot for the highest number of foreclosed properties.  In an effort to stop this trend, the government of California now requires banks and other lending institutions to contact delinquent homeowners 30 days prior to filing Notice of Delinquency to make loan modification mandatory.

California Civil Code 2923.6 which was enacted last July 2008, requires Lenders of residential loans in the State of California to accept loan modifications in most foreclosure situations. This applies to all residential loans made from January 1, 2003, to December 31, 2007. Loan-modification solutions can include freezing or reducing interest rates, reducing the principal or extending the term of the loan.

Analysts have agreed that this move on the part of the state government is a far more superior program to combat foreclosure as compared to the federal bailout funding. In this program, the spending of taxpayer’s money by the government was eradicated while controlling the situation. Cooperation is promoted among the borrowers and lenders to seek solutions in order to promote mutual interests.

With this program, both the government and the public are expecting a drop in the number of foreclosure proceedings in the coming months and years. This long-term solution may take a while to feel its effect but it is viewed to be more effective in solving the problem as it addresses the root cause, providing homeowners with more affordable payment options instead of giving them additional loans.

What Californians need now is a thorough knowledge regarding this all important law. This law, however, does not mean that a homeowner has to be behind in his payments before they can ask their lender to modify their loan. Homeowners who are up-to-date in their mortgage payments can contact their lenders and propose loan modification agreements.

There are available loan modification experts who are willing to help distressed California homeowners in having their loans modified. They can give professional guidance and counseling to reduce undue anxieties and risks in regards to their mortgages. Most of these experts come from loss mitigation companies that can also offer legal remedies from their in-house lawyers to make sure that a homeowner’s rights are defended to the best of their interests. They require some reasonable fees for their services.

However, homeowners are also cautioned to trust only reputable loss mitigation companies. With the current real estate market situation and the enforcement of the new law, there are also increased number of scams and frauds reported associated with loan modifications. Therefore, it is always best to examine each company’s profile.