California Gov. Arnold Schwarzenegger approved a bill appended to the state's budget package last week that institutes a 90-day foreclosure moratorium throughout the Golden State. Introduced by Sen. Ellen Corbett (D-San Leandro), the moratorium applies to first mortgages recorded between January 1, 2003 and January 1, 2008.

State regulators, however, can deem loan servicers and lenders exempt from the new law if they have a mortgage modification program already in place that includes principal deferral, interest rate reductions for five years or more, or extended loan terms. The lender's loan restructuring program also has to ensure new monthly payments are no more than 38 percent of the borrower's income. The state's stipulated debt-to-income ratio is significantly lower than the 31 percent target called for in the Obama Administration's Homeowner Affordability and Stability Plan.

Kevin Stein, associate director of the California Reinvestment Coalition, told the San Francisco Chronicle, "It was a step backward from where things were going from an industry standpoint and a federal standpoint."

According to the Chronicle, Corbett herself said that she would have liked a bill with stronger enforcement for modifications but was limited from more aggressive measures by the state's banking regulators.

Mortgageorb.com reported that California’s banking groups, including the California Bankers Association and the California Mortgage Bankers Association, have written strong oppositions to the bill, arguing the moratorium will negatively impact home sales and further delay recovery.

Beth Mills, a spokesperson for the California Bankers Association, told the Chronicle that struggling borrowers and their lenders already have more than enough time to search for mutual solutions. Mills pointed out that a state law passed in 2008 increased the required time span between first notification of foreclosure and final sale of the property by 30 days, to a total of 141 days. According to Mills, more time is not the silver bullet to every troubled loan, the Chronicle said.