California SB 94 Expected to Become Law Today – No More Upfront Fees on Loan Modifications
October 12, 2009 by christine
Today, California Governor Schwarzenegger is expected to sign SB 94 into law.
To summarize, the bill prohibits persons from charging advance fees to borrowers in connection with the modification of the terms of the borrower’s loan, require those who wish to charge a fee for loan modification services (after performing them) to provide a specified notice to borrowers regarding other options available to the borrower, prohibit servicers from imposing any interest or charge for performing services for borrowers in connection with loan modifications or other forms of loan forbearance of forgiveness; and close a loophole in the California Finance Lenders Law.
As we’ve discussed on this blog before, this bill will probably end the loan modification industry in California as we know it.
If you listen to the steady stream of propaganda coming from the California Attorney General’s office, you’d think everyone who performed loan modifications is a scam artist.
The California Attorney General’s advice to do your own loan modification is highly irresponsible. He assumes that the banks have borrowers’ best interests at heart, which we all know is not true. If you’re worried about scammers, let’s take a look at the banking industry, which is the biggest scam artist of them all.
According to a legal assistant contact in one of our attorney’s offices, loan modification companies and law firms alike are literally closing their doors because of this law. The industry is changing overnight.
The good news for homeowners who want to hire an attorney’s office to obtain a loan audit is that it will allow them to break up the cost of the loan modification over time. Because of the rule against charging upfront fees, the costs of the loan modification will be billed over time as the work is completed.
The downside is that the cost of a loan modification from a legitimate provider will go up because of increased administrative and collection costs.
Related posts:
- Announcing No Upfront Fees for Loan Audits I’ve been thinking for the last week about how to continue providing quality services in light of the new law...
- “Trial Period” Loan Modifications are Just Another Scam I’ve been hearing rumblings lately about how many people are easily getting into “trial period” loan modifications and the occasional...
- 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...
- Net Present Value and Loan Modifications We recently posted a blog article that talked about why loan modifications weren’t working. In that article, we talked about...
- Video: CA SB 94 Becomes Law: No More Upfront Fees for Loan Mods ...
- California Cracking Down on Foreclosure Consultants Christine talks about California Bill 94 and Attorney General Jerry Brown’s crackdown on foreclosure consultants. This is not helping California...
- Get Your Loan Audit While You Can…. I just ran across this story on ABC 15′s website about the “latest foreclosure scam to hit the Valley: forensic...
[...] signed Senate Bill 94 today which bans the collection of advanced fees for a loan modification. The Foreclosure Industry blog spoke against the measure, To summarize, the bill prohibits persons from charging advance fees to borrowers in connection [...]
While I understand your frustration in the way the industry is treated, your statement that “this bill will probably end the loan modification industry in California as we know it” is way too harsh.
As you mention, there are still ways to successfully help people and still be fairly compensated. In my opinion, it helps clean up some of the bad parts of the industry.
For the most part, SB 94 seems like a positive thing.
It’s already changed the loan modification industry — even law firms who were helping people with loan mods are closing their doors. It’s not a criticism but the reality of what is happening as a result of the change in the law. There are legitimate people who are helping homeowners and those are the people who are willing to do what it takes to comply with the law. It’s essentially raised the barrier to entry, which is overall a good thing but this bill will limit homeowner’s access to legal representation. No one wants to work for months without getting paid, so those people will leave the industry altogether.
It’s amazing to me how corrupt and dumb our legislators are! The effectiveness of HOPE and the lenders in modifying loans has been nothing short of atrocious and they decide to put private loan modification companies out of business? Now it’s illegal to hire a good Attorney to fight our lender against foreclosure. How can our government pass a law preventing us from hiring an attorney?
I think the breadth and depth of the real estate problem in this country took everyone by surprise, and this legislation is an attempt by our government to do something, regardless of whether it makes any sense.
CB, there are still lawyers out there who are helping people. It’s not illegal for lawyers to provide these services, it’s just a lot more regulation and more expense for everyone involved.
If you need a referral, please send me an e-mail. Good luck!
.
This is unbelievable! Do these idiot legislators think that any attorney, CPA or other mortgage professional is going to work to negotiate with lenders in hopes of gettng paid by a homeowner who is probably broke? Even if they’re not broke, what’s their incentive to pay? They’ll get a black mark on their credit? Ha! This law would make a lot more sense if the banks cared about negotiating with homeowners, but all they do is give them the runaround.
A new study by Federal Reserve researchers found that government initiatives to stem the country’s mounting foreclosures don’t work because banks and other lenders have more financial incentive to let borrowers lose their homes than to work out settlements. Here’s the story:
“Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization”
http://www.frbatlanta.org/invoke.cfm?objectid=149C4D27-5056-9F12-12C089648203E1FD&method=display
Hampering homeowners who need help fighting the banks who are holding them hostage is shortsighted and just plain stupid. Sure, there are some loan mod scammers, just like there are in every other busiess. OK – prosecute the hustlers. But to require that the pros don’t get paid until after the fact just ain’t gonna work.
M. Banks
Agreed! Thanks for your comment!
what are the laws for the rest of the 49 states?
I haven't researched the laws for all 49 states. I would suggest running a google search for your particular state. Many states now have laws on upfront fees but I don't have a list of them.
I haven't researched the laws for all 49 states. I would suggest running a google search for your particular state. Many states now have laws on upfront fees but I don't have a list of them.