CA’s New Loan Mod Law: S.B. 94

Loan mods have been in the news  lately, mainly because so few have been done. Since March when Obama announced the HAMP program,  fewer than 600,000 have been partially completed. That’s an abysmal record because the number who need loan mods is closer to 15 million across the country. Some 24% of all CA mortgage loans are now under water and so in dire need of loan modification.  After a brief respite, thousands of adjustable mortgages are now due to reset–upwards, of course.

So, who’s to help beleagured homeowners get loan mods? Attorneys, real estate agents, so-called foreclosure consultants? Don’t count on any of the above now. In response to the many scammers in the loan mod field which requires no l icense or any other kind of regulation, the California legislature has made it illegal for anyone, even attorneys, to require up-front fees to help homeowners do loan mods.

To make it crystal clear: anyone who requires money up-front to help you do a loan mod is in violation of the law and is most likely a scammer and not going to help you. All legitimate avenues of help–attorneys and real estate agents–know about this law and have stopped demanding money up-front.

Of course, they have also stopped helping homeowners apply for loan mods, leaving them to government-run programs, such as HUD’s,  which do help with the paperwork free of charge, but do not make the follow-up calls or provide and help in how to fill out the forms to best advantage. So far, the loan mod process is like walking through tar–hot and slow. It can and does take up to a year to get into a trial period loan mod with the lenders demanding reams of paperwork. Very few loan mods have emerged from the trial period which is supposed to last only 3 months. Good luck to you if you have more than one loan…Banks should be happy with this new law as now they can deal with naive homeowners directly or what seems to me their decided preference–not at all.

Some have said agents and attorneys don’t get paid until the end of their regular transactions anyway so what’s the difference? Won’t they continue to do loan mods in any case?  Here’s the difference–these professionals are paid out of escrow. They do not have to go after a credit-challenged clients personally. What this law means is that these professionals will no longer do loan mods.

Are the scammers still out there? It’s very possible. I don’t think the general public is aware of this new law which went into effect in October of this year. So the scammers are still running wild. Just remember–any0ne asking for upfront money to do a loan mod is most likely a scammer and is definitely breaking the law.

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