Is California’s Attorney General Really Protecting Consumers from Loan Mod Scams?

Absolutely not!

California’s AG, Edmund Brown, has gone way too far in his supposed bid to protect Californians. I’m probably late in my commentary on this issue, but I recently did some research and was stunned when I read about what the AG and lawmakers in California are doing.

It’s great that Brown wants to protect Californians; that’s his job as Attorney General. It’s too bad he wasn’t around BEFORE the mortgage mess. If he was truly protecting consumers on the home loan issues, he should have been doing it long before the housing bubble burst. It’s really easy to look like you’re helping homeowners AFTER the damage has already been done.

So why all the press conferences, public appearances and opportunities to look tough on loan modification scams? You guessed it: Brown is running for Governor of California and will use all this saber-rattling to convince Californians that he has done a good job of protecting the citizens of California.

California Bill 94 was also passed recently, and it’s a tough law that on its face appears to protect homeowners by cracking down on scams and unscrupulous loan modification companies. The problem with the law is that it erroneously assumes that everyone and anyone who does anything related to foreclosures or loan modifications are scammers and out to prey on homeowners, which is absolutely not true.

Interestingly, the California Department of Real Estate is telling California homeowners via their website to do their own loan modifications.

While I obviously think that an individual should have the option to get a loan modification on their own, they should also have the option to hire someone to help them. What if you don’t want to deal with the endless hours on the phone to get through to the lender? What if you don’t want to negotiate your own loan modification? You’d probably hire someone to help you. But this law makes that difficult.

Even worse, based on the lenders’ track record, we know that they aren’t helping enough people fast enough. They’ve only helped a fraction of the homeowners who qualify for a loan modification.

As a result, you’ll see real estate values continue to fall. We haven’t hit bottom yet! There’s still a massive wave of Alt-A loan defaults that are coming.

You’re also going to see an exodus of qualified, legitimately operating people and businesses providing services related to foreclosures either leave the state entirely, or stop providing services altogether. No one wants to work for free and no sane person would want to be subject to that kind of scrutiny.

You might be thinking that those people who are legitimate should get licensed, right? Yes, they should comply with the law. But just because you have a license doesn’t mean Brown won’t investigate you! Even lawyers, who are already subject to licensing and ethics requirements, are being investigated.

Whether intentional or not, the goal of this legislation seems to be to force everyone who provides services in this area out of business.

When that happens, homeowners lose access to legitimate, qualified professionals. Homeowners, who were preyed upon by the lenders in the first place, are left with only one option: deal with the people who wrote the bad mortgages in the first place and do it without representation or any tools to help them get a better modification.

What happens when their lender says they don’t qualify for a loan modification? Foreclosure or bankruptcy are likely outcomes, both of which might be avoided if this legislation were written to protect consumers instead of the banks.

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