As the coronavirus continues to take its toll on the California economy—and that of the entire world—one of the big topics of discussion is the potential for foreclosures. There are eviction and foreclosure moratoriums still in place, and many homeowners have been granted mortgage forbearance during these tough times. However, those missed mortgage payments will eventually need to be paid. What happens then?

California’s New Legislation

California is doing what it can to prevent a lot of single-family homes from becoming rental properties. This is what happened in the Great Recession, and it was part of the reason why the real estate market was so slow to recover during the early half of the 2010s. Wall Street investors came in and bought up a lot of lender real estate owned (REO) and other distressed properties (over 5 million homes) to be converted into rentals. Many experts figured these foreclosures would eventually return to being owner-occupied properties, but that didn’t happen for all of them. Investors were still able to find ways to keep hundreds of thousands of houses as rentals.

Governor Gavin Newsom recently signed a new bill that will give tenants, affordable housing groups and local governments the first chance at buying any foreclosed homes in the state. This new legislation, SB1079, was started by Moms 4 Housing, which is an Oakland-based activist group. It essentially bars sellers of foreclosed homes from bundling them together and selling to a single buyer in auction. It will also allow certain individuals, local government and non-profit groups the first right to buying these properties, with 45 days to outbid the best auction price on any given home. Fines of up to $2,000 day can also be imposed on the banks who own the properties if they fail to keep up with basic maintenance.

Impact Yet to Be Seen

So far, California has avoided any massive foreclosures during the COVID-19 crisis because of the foreclosure moratorium in the CARES Act and the mortgage forbearance options made available to homeowners. Yet, the amount of mortgage delinquencies continues to rise along with unemployment numbers. Most forbearance plans expire by next March unless the government takes further legislative action.

Some homeowners are taking advantage of current market conditions to sell their property while they still can. Because housing prices are so high and mortgage rates are so low, there is a lot of buyer demand and the sellers are in a position of negotiating power. Even some homeowners currently on forbearance plans can sell and use the equity they earn to come out ahead and move onto a more affordable living situation. Others are taking this opportunity to refinance to a lower rate, as long as they qualify for a new loan and aren’t behind on current mortgage payments.

Looking Ahead

It will remain to be seen how this new California legislation impacts the state’s housing market if and when forbearance ends and foreclosures and short sales become a very real possibility for many homeowners like they were during the Great Recession. We may not see any real impact until next year, and the government could end up extending forbearance options. That impacts the economy in different ways as banks and lenders are losing significant cash flow, and this could ultimately drive mortgage rates up.

There is so much going on right now with real estate moving so fast in this seller’s market. Only time will tell if it becomes a buyer’s market next year when foreclosure numbers have the potential to go up dramatically.

If you are looking to refinance or buy a new home, or you have questions about your existing mortgage loan, Transparent Mortgage is here to help. Call us today at (619) 701-3906 or email me directly at

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.