Kirk M West's Blog

With the stroke of a pen, Gov. Schwarzenegger signed Senate Bill 94 and put an end to loan modifiers who charge up front fees. The action comes following massive complaints to the Dept. of Real Estate concerning loan modifiers who took borrower's money - up to $4,000 - and then abandoned them. While not condemning all modifiers, the new law applies to every such company that collects up-front fees.

Earlier this year, State and Federal crackdowns on loan modifiers limited such services to real estate licensees and mandated DRE approved contracts for any up-front fees. However, many simply ignored the restrictions. More significantly, the earlier law excluded attorneys. As a result, law firms quickly filled the gap by collecting up-front fees and then partnering with loan modifiers to do the actual work. The new law puts an end to this.

While protecting the victims of these scams, the intent of the law is to stop abuse of borrowers in trouble. Legitimate loan modifiers can still operate but they cannot get paid until they have performed all of the services promised in their contract with the borrower. This does not require that payment only be made if the modification is successful. Borrowers must pay the loan modification firm for the services they provided, even if the firm cannot get the loan modified.

Furthermore, the modification firms must tell potential clients that they may be able to get the same services for free from government-approved nonprofit mortgage counsellors. You can find these by Googling under such names as "nonprofit mortgage counsellors" or "debt management consultants".

I would expect that with this latest crackdown, getting access to this free help will become much more competitive so don't wait. Act now and be persistent.  The new law will expire on January 1, 2013 which coincidentally is the expiration date for the Federal Debt Forgiveness Relief Act. Apparently the concensus in Washington D.C. and in California is that this real estate mess will be cleared up by the end of 2012 so loan modification protection will no longer be an issue. We'll hope that they are right.

I also believe that the number of professionals offering ethical and much needed help for those homeowners out there will decrease sharply.   This will most definitley chase away the  "crooks" our there. Unfortunately it will also make the other professionals decide to stop offering the assistance that they once had due to their understandable reluctance to spend time and resources for clients without being compensated in due time. 

If you or someone you know requires assistanc with loan modifictions or short sales.  Please call me immediately.  916-893-9666.