When the last wave of foreclosure moratoria (some regulatory, some self-imposed by the lenders) ended, there was a spike in notices of default. The conclusion was that the moratoria were an ineffective way at dealing with the problems in housing. It shouldn’t surprise anyone, then, that California legislators decided to give it another round.

Central Valley Business Times reports Mortgage moratorium clicks into place today:

A state law imposing a 90-day moratorium on some California home foreclosures takes effect today.

But it’s not all-inclusive. The law lets state regulators grant loan servicers and lenders exemptions if they have a mortgage modification program in place that meets state requirements of reducing mortgage payments to no more than 38 percent of a borrower’s income.

This is being under-reported. Too many details are missing (the linked article is the best I could find). Also, I’m too lazy this morning to look at the actual bill. Is this a moratorium or not? If the exceptions are numerous enough, this will be an exercise in regulatory masturbation (it gives the legislators a good feeling, but accomplishes nothing). If it actually works as titled, we’ll have effectively kicked the can down the road three months. Then we will see another spike in filings. When all of that inventory hits at the same time, it will be a bigger shock than if it had been spread out over three months.

The position generally argued by those that favor government action is that legislation, when properly crafted, can act as a safety valve. The California foreclosure moratorium looks more like a bubble gum patch. Other than those who are delinquent on their mortgages who decide to take advantage of the moratorium by living 3 months rent-free, I don’t see how anyone can appreciate this so-called “fix.”