Mortgage & Real Estate Brokers: Upfront Fees on Loan Modifications NOW ILLEGAL in Los Angeles
The Los Angeles City Council has made it illegal for mortgage and real estate brokers to charge an upfront fee when offering to help distressed homeowners obtain loan modifications. This effectively puts the loan modification business for real estate and mortgage brokers out of business. Gone. Bye-bye…
In case anyone thinks that’s not the case, let me explain.
Once a mortgage is modified, what would a loan modification company do if the customer didn’t pay the bill? Threaten to ruin the homeowner’s credit? You must be kidding. These are people that almost lost their homes. Their credit, you might consider, already leaves much to be desired. Take them to Small Claims Court? Sure, why not. As long as you understand that the best-case scenario is that you’re going to get like $20 a month, Small Claims Court might work out fine. Of course, when the homeowner doesn’t make the $20 payment, you’ll be going back to court or chasing a homeowner around for $20… well, plus late fees, so let’s say $24.
And please don’t tell me that people will pay their bill because they’re just that appreciative of the work that was done. Because I have a friend who runs a hospital, and 50% of his bills go unpaid all the time. Why do you think hospitals are so interested in what kind of insurance you have? Because they know that 50% of the patients won’t pay their bills, that’s why.
Helping someone with a loan modification without an upfront charge is something a nonprofit organization might do, but it’s not a business plan for a for profit entity… unless of course you follow the hospital pricing model and start charging $7,000 for a loan modification. Then when half don’t pay, you’ll be okay.
Yep, now that’s what I call a law that’s helping troubled homeowners. Thanks Mayor Villaraigosa! Good thinking there. You’re a smart one, I’ll give you that. Did you have anything to do with the Hope-4-Homeowners program, by any chance? Just wondering…
Here’s what I found to be the most amazing aspect of the story in the LA Times. It said: “Some of the services are legitimate, officials said, but others are not.” SOME are legitimate? OTHERS are not?
Let’s see… how many are there in a “some”. Hmmm… I can do this… wait… okay… minus 7, plus the sum, divide by 2… carry the 3… hmmm… SOME? How many is some? Is some “most”? Is some “many”? How can you put an entire industry out of business, an industry that is more needed at this moment than perhaps any time in history, on the basis of “some”?
And “OTHERS” are not? OTHERS? What’s the deal? Did we put people on the LA City Council that can’t do math? Do we have remedial learners on the LA City Council? No wonder Los Angeles is in such great shape. How many new roads do you think we need? “Some.” Oh, goodie.
Why is it that not one story in the entire country that claims that there are loan modification scams around every corner can come up with a number. I mean a number over say 22… or 71… or even 250, which is the number of investigations the California Department of Real Estate says it’s investigating as related to loan modification firms. The Illinois Attorney General was recently quoted as saying that she filed charges against two loan modification scams, but that’s not such a big deal. There are more than two Illinois governors in prison in Illinois, last I heard.
And why does nobody seem to notice, much less care, about the amazing lack of specificity on this issue? On April 6th, you might remember, Secretary Geithner and Attorney General Holder went on television to tell the country about all the scammers out there. And all they could come up with was five cases filed to halt loan modification scams and 71 companies they sent letters to because of “suspicious advertising”.
Oh yeah, and there was that little white lie they told about the 2100 cases of mortgage fraud the FBI is pursuing. In case you didn’t read my last column, I looked it up on the FBI’s Website and the only problem with the number was that it referred to mortgage fraud, which has very little to do with loan modifications. But other than that, you’ve still got the 5 and the 71 letters… not bad. Better than “some” and “others,” I suppose.
Mayor Antonio Villaraigosa, in an effort to prove beyond any doubt that he is both out-of-touch, and misinformed, referred to the new law as “a tool to help residents keep a roof over their heads.”
After carefully researching this issue for several months now, there is only one thing I know for sure: Reducing the avenues available for distressed homeowners to turn to for help with modifying their mortgages will NOT keep a roof over anyone’s head. Period.
Just so we’re clear, The LA Times story reported the following: “State law already prohibits mortgage consultants from demanding upfront fees from homeowners who are in default, the first stage of foreclosure. The new Los Angeles law, which the council approved unanimously, will apply those protections to all homeowners.”
Approved “unanimously”? Well, I’ve got to hand it to the banking lobby. Nicely done. You guys should work for the Swine Flu… you really know how to panic a population out without details. Keep it up and soon there will be no more private sector loan modification firms. I know you’ll be happy about that. Then, the millions of distressed homeowners will have nowhere to turn to for help that’s on THEIR side. They won’t qualify for Obama’s insipid little program, so they’ll have no alternative but to try their luck with the banks on their own. Scared. Unknowledgeable. Easy as pie to intimidate in almost every case. I’m sure that will work out real nice for you.
I wish I knew where banking lobbyists hung out after work. If any readers know, please send me a message. I’ve pretty much had it with them and I’m not above throwing a few of them around in a parking lot after a few beers. If anyone would like to join me, you know how to reach me. Come on… it’ll be like old times.
Hey banking geeks… I wouldn’t be too proud of your victory here, though. You only beat the private sector loan modification firms and that’s hardly an opponent. I’m trying to organize them in order to fight back and I can barely get a return call. Well, alrighty then… so this round goes to you. Big deal. So, you beat a bunch of starry-eyed optimists that thought it mattered whether they were doing a good job. Well, this will probably teach them a thing or two. And it does cost money to go to school.
The LA Times also said: “As the housing crisis has worsened, signs advertising such services have sprouted across Southern California.” Ohhhh… bad signs! Did they also outlaw bad signs? After this, I think I’ll go out with my baseball bat and kick a sign’s butt. Maybe that’ll make me feel better, but somehow I doubt it.
Lastly, the City Council also enacted a provision in the new law requiring a written contract between a mortgage consultant and a homeowner that allows the homeowner to cancel within seven days… which only proves that the Los Angeles City Council has NO CLUE what they’re doing, because that provision couldn’t possibly be met with any objection because there won’t be any firms left to object.
Does the new law allow attorneys to continue to charge for legal advice related to loan modifications? So, does the new law apply only to non-attorney advisers? Also, the new law seems to only apply to LA city residents and not LA County? It will be interesting to see whether your critique of the decision-makers and their law is persuasive enough to prevent a national wave of similar such legislation.
The LA City Council hasn't yet published the written text of their new and fabulously well thought out law on loan modifications and fees, but I don't think it speaks about attorneys... but with this group, I'm not ruling anything out. As soon as it's available, I'm going to read it and I'll let you know...
My first understanding of Obama's plan for stabilizing the foreclosures was that he wanted loans modified...versus refinanced. I know I read his plan right...I know what he said in February, I know how I have watched him de-volve into the spokesperson for refi...deliberately changing his terminology from modifications to the success his plan has had in refi's...tonight, he called it a "spike"...f$#@ him. He is giving the banks money thinking he will save them with the multitude of refi's the banks will get whenever he speaks of the help he is giving distressed homeowners...think about it...he says "spike"...distressed homeowners run to banks to get loans modified. Only the banks have their own plans...ie Wells Fargo's "H.A.R.P." plan, that they lead you to believe is your beloved Obama's plan...only to find out it is nothing more than the BANK'S plan...a refi, that the bank is going to not only charge you points and closing costs on, they are going to take you back to day one on your interest...who wins? The banks...and Obama...he gets to say his plan worked whenever a refi happens now...and the banks get all the fees they charge for refi's...I thought Obama said "if you have to pay, walk away"....I don't know about the other banks, but Wells Fargo wants to charge me closing costs, points, and start my loan all over costing me more interest...I am filing deceptive business practices charges against Wells Fargo with the state of Colorado...they are trying to charge me a fee to fix my loan...why isn't the government after the banks for scamming consumers???
Just a question, When did The Los Angeles City Council become a private enterprise? The last time I checked, the tax payers had a say in their positions, so how does a city council meeting take place without a public announcement? I’m just asking. Maybe it was announced, can anyone send me a copy?
I wonder if the banks catered the event. (Just asking).
:?
Sperry, I think you get “it”. You are hitting on a subject that is very delicate. “Why isn't the government after the banks for scamming consumers? The fact is, the banking world, “GSE”’s and all Obama’s recently appointed Treasury Department’s appointed loan servicers all have connections and agenda s that are much bigger than they think you or I can start to understand.
Trust me: I, many of my colleagues and others get it as well. This is not some crazy conspiracy hypothesis. We all have information soon to be revealed, so hang in there!
I wonder if the banks catered the event. (Just asking).
:?
Concernedpro... Catered by the banks... I started to laugh at that, and then stopped and thought... I wouldn't even be surprised.
Trust me: I, many of my colleagues and others get it as well. This is not some crazy conspiracy hypothesis. We all have information soon to be revealed, so hang in there!
Concernedpro... The reason the government isn't after the banks is twofold... or maybe threefold... one: their working with the banks and the banks are playing chicken with Treasury. two: there's no opposing voice. and that's the fault of the industry. three: public support hasn't been developed... the people don't know yet, but wait until the ALT-A loans start to foreclose... that's not sub-prime... that's well-off white people we're talking about. People will come, Ray... of yes, people will come.
In reading Mandleman's op-ed regards RE Brokers and the Upfront Fee's it renders a realization that The Los Angeles City Council approach is clearly void of understanding of the complexity of the over all picture, problem and eventual solution that will be required to be enacted on a national level that needs both private and gov't entities to formulate an effective beta test that, at the end of the day resolves the "Lesser Loss Paradigm" that respects the sustainabilty of the home owner and the loss writedown minimums for the mortgage security certificates on Wall Street and else where in the financial sector.
What is insult to injury ,is to accept the very decisions the beneficiaries of the servicing companies currently are offering are to a large degree still with out standardization in underwriting principles.
Rendering at best a desolute array few lenders that are getting the drift and a vast majority still remain "Dear in headlights" in both true understanding and corporate culture, in the enevitable economic outcome for their beneficaries and home owners.
They remarkably continue unabated to do it without any regard to obvious reconized economic principles and accounting standards that would make any (honest) novice student of math algorithms blush with embarassment.
That's ofcourse if the instutution of higher learning actually manages to stay within the means of factual definitions in pensum material shared.
(PS. Pensum is latin for "Factual Educational Reasoning Format" loosely translated for you non Latin speaking folks!)
2 years later and 2300 files later submitted to the nations lender/servicer community,renders REAL leasons in loss mitigation that are being assembled in a whole new format that will shortly, with the alliance and allumni business connections currently available to my company , shortly will bullitt proof reality, for the first time on a national level and with the endorsements form vurtually all of the leading Gov't Entities, A REAL AND COMPREHESIVE Mitigation platform that encompasses all areas of truthful mediation with the least loss to the home owner and the Global financial community.
Mandelman got it right in all areas of his perspective and this is an individual that i hazard to think has garnered the scar tissue professionally I have accumulated , the past 2 years going to work ACTUALLY rendering a difference to home owners representation needs gets my best and highest consideration of a journalist in a completely different field, makes his perspective more compelling in appreciating his sentiment , passion of "Getting it" as a third party observer, all the more valid.
I just go to work on a daily basis,(for profit) dealing with all the frailities and challendges that it will take to eventually offer up the final resolution both technology wise and administrative wise , that effectively will push this nation through our economic crisis.
End my thoughts with this,
It should be the Los Angeles City Counsil asking us industry leaders for our workmanship experiences, technology supported and acumen of workable seemless resolutions that harness the Home Owner and the Beneficary/Servicer/Lender the highest and best economic outcome with the least loss to both sides.
Instead, voter and politically charged empowerment,convenienced by lack of transperency in accountatabilty rules the day.
Orson Wells 1984........
Margaret Thatcher , British Prime Minister 1978-1992 said it best in her memoriores and quote:
"The damnest thing about socialist gov't premise of latitude is ...You eventually run out of some one else's money to solving your own insolvency!"
The Los Ageles City Counsel just boxed them selves out of not only the industry solution but enevitably will have to spend tax payer money to replace our function.
If that ever could be done, please.
But then again, 50 years of entitlement practice of politics, voiding real solutions just underlines the score of political leaders managing our gov't institutions have clearly departed from willful service towards their constituants for the allmighty cloack emmersing themselves in the blanket of feel good politics defending the notion, they ACTUALLY care.
All the Los Angeles City Counsel did was injure and marginalize every home owner in their county from real resolutions readily available,
at the expense of us CA State tax payers in the long run.
This is what Mandelman got so right and for that I applaude him.
All my best Mandleman,
We will get it right, eventually all things considered.
So god help us, because faith is all i'm left with these days going to work feeding with the novel help of a paycheck, my family.
You take away my paycheck, you take away the option a home owner has engaging with an intelligent company, their best representation.
Lenders still at the end of the day will foremost only consider THEIR BEST interest.
Unless we are in their face.
And what a remarkable difference we already have made. TRUST ME!
Here is the other side that yet has been truly addressed honestly by the media or current US.Administration.
Or rather maybe lack of guts, even tabling the issue.....
I deposited upon the birth of my two daughters $25,000 into their college tuition account,each. 8 years later opening up AIG's quarterly statements this evening, they are a combined worth less than $8,000 in asset valuation.
And i'm being told i'm one of the lucky parents. And this is a tax deductable account no less. Whhooooopeee!!
So here is my question that might make you go...hmmmmm.........if you stop the loss write downs with the right economic resolutions rendering the beneficaries a higher return to the mortgage backed certificates evaluating WITH SINCERITY the home owners TRUE documentable sustainabilty ...do you think you stop the bleeding with our mutual funds???Pension Funds? College Funds? etc...
Or atleast contribute to softning up the write down curve and eventual stabilization of confidence in the individual investors perspective re engaging the financial markets?? Geez dare I ask for the purpose of Capital gains??? .......oooops...dirty word these days,sorry Obama...my bad...
I actually thought i was entitled to a return on my investment.....to motivate me to invest in the first place.....
Silly me......
Things that make you go....hmmmm!!!
No.... can it be true.....our pension, retirement, college funds are actually the ones that end up paying the bill??On the back of the actual material value producing American Family?
At the detriment, maybe enevitably at our kids expense.....in 2020, 2025....tax wise? At the tune maybe 25 % sales tax in our country as it currently is in the EU.......go to Starbucks, order a cup of Coffee in 2020, pay $13 for 12 oz. and pony up an additional $3.25 sales tax, we are already at 10% today, to the total of $ 15.25 for a cup of Java.
Gasp!!!!Gosh...no one thunked that one out?? Really? Try inflation math at our current rate,,,,,,thats where we are headed,,,,,,
Now try to pay for a mortgage payment in 2020.
10 years away folks!!!
And CNN said this evening we "Just about are turning the corner,pulling out of this mess......!!"
Humor still remains my filter of reconciliation.
Terrific input!
You seem to be the one to ask this question,
From what I understand, the government/Obama team has named companies such as Chase, Wells Fargo, GMAC, Citi, SPS, Carrington, Saxon, Wells Fargo etc. as the companies to deliver and be the “trusted resolve” to millions of challenged homeowners as they have received billions in their efforts to “help “ challenged home owners who have loans with these entities.
At the end of the day, are you able to share anything but major disappointments from challenged borrowers of these named companies?
I raise the question that will make even Mr. Mandleman blush.
What motivation is there from these entities if they are receiving huge dollars to offset “write down losses” including “parking the asset/covering carrying costs and reselling to the Feds. (Sorry secret family members) sorry open market, oh yes did I mention their “Realtor of choice”?
In the mean time are these entities not able to re-book the asset the way they want and not at a loss?
Answer: HUGE reward from those they are associated.
Private enterprise will continue to be squashed, but it would be nice if the public was exposed to the real deal and gain clarity as to who is in favor of or against them.
there is a 30 dollar do it yourself mod book.
if you are that concerned get a webhost for $7 a month and post your own
similar content for free.
the result:
scammers dry out
banks have worthy adversaries in a well informed consumer
eliminating risk of being taken advantage of by outsourcing the math
do it.
or is there some other agenda lurking about
The only copanies this will hurt are the ones that have an advance fee agreement with the DRE and are operating legally. The ones that are ripping homeowners off will continue to do so, because law enforement does not have the resources to prosecute them all. The profit margins are too high, homeowners are desperate and ignorant, and greed is a powerful motivation to break the law. :twisted:
I dont believe this will affect Attorneys. However, I do think that if they claim to be attorneys the location must be identified with the local & State Bar Association with a licensee and literally have the attorney present "always"? I imagine a lot of people claiming to have representation, might actually have an attorney on retainer at best ....or "prepaid legal" LOL....
Pre-Paid legal now that is really funny but probably very true. Loan Mods as we know them are dead. It really is to bad because there are a-lot of people that need help and are not going to get it, but again it's over. You can buy quality internet leads now for pennies on the dollar, and all those landing pages and banners. Not good for the banks and to many people just collecting checks.
Does anyone know if these laws against upfront fees are on a city level, or state level?
Any comments or pearls of wisdom regarding CA SB 94 currently moving through the legislative system?
I own a reputable loan modification firm and this will destroy our business. Now, because the politicians are over-zealous and ignorant of how their actions will truly manipulate a fragile dynamic my company and homeowner's truly in need of representation will both lose!
Good job Big Brother! Way to watch out for us little people. The banks win again and everyone else is ...
Senator Calderon;
I am writing to you regarding SB 94 and your involvement with it. I wholeheartedly acknowledge that measures must be taken to protect troubled homeowners from unethical companies and individuals in the foreclosure prevention or loan modification industry. There is no doubt whatsoever that many firms and individuals are operating illegally and unethically. I strenuously disagree with SB 94 in its present form however.
If SB 94 becomes a law honest and hardworking people working in this industry will be unduly punished and a greater number of homeowners will lose their homes to foreclosure or receive only marginal modifications that merely forestall foreclosure. Clearly, you and your co-authors do not believe that loan modification firms (even those that are ethical and compliant) provide any real benefit to their clients. The wording of the bill and comments made at a press conference regarding this issue reveal your sweeping disdain for the entire industry.
You and others have been asserting that troubled homeowners can obtain a modification by working with their lender on their own or with the assistance of a non-profit agency. Certainly there is a kernel of truth in these statements. In some instances there is no need for representation. An individual can also represent themselves in court (the parallel of attempting a modification on your own) or obtain the assistance of a court appointed attorney for free (the equivalent of relying upon a non-profit for modification assistance) but I cannot recall anyone with a measure of common sense recommending either of those choices if the means to do otherwise is available. Those who can afford quality representation have always been able to do so and should not be deprived of that right by heavy-handed legislation. Certainly you can see the parallel and I believe it is a fair comparison. SB 94, in present form, runs contrary to the free-market principles that are emblematic of our state and nation.
I strongly urge you to seek out a number of your own constituents who are experiencing mortgage difficulties and actively become involved in assisting them with a modification. Within this context you will have the opportunity to fairly judge whether or not paying for quality representation has merit. No need to take my word for it, try it yourself and see how difficult it truly is. I also encourage you to work with a troubled homeowner via a non-profit. Again, I believe you will eventually come to realize that although the representatives at the non-profits are often well meaning they are, unfortunately, ill-equipped to effectively assist troubled homeowners in obtaining a truly meaningful modification.
Recently, U.S. Representative Maxine Waters experienced first-hand the frustration and lack of success that a typical homeowner encounters as they try to work with their mortgage lender. I encourage you to watch the ABC News video that documents her brief encounter with loan modification assistance if you have not already done so. It suffices to say that she was thoroughly frustrated and disgusted and felt that her experience (even though she is a prestigious legislator) typified that of most borrowers seeking assistance directly from their lender. Most people are ill-prepared to navigate the lenders processes even if they have the time to do so. In an effort to obtain a balanced perspective on the matter I again encourage you or someone on your staff to become intimately involved in attempting to obtain a resolution on behalf of troubled homeowners. I advise you to become involved in a number of cases from a broad cross-section of lenders/servicers, with and without non-profit assistance, with various loan types, and various hardships in order to gain a realistic perspective.
Is there not a better way to clear the unscrupulous elements from this industry? SB 94 solves the current problem with the subtlety of a club in circumstance where the precision of a scalpel would be more effective. This legislation will surely eliminate the vile elements that are preying upon people in desperate need of help. Just as surely though, it will eliminate the lawful and ethical firms and individuals that are providing real and effective help. Is this the intended purpose of government? To eliminate and hamper businesses that are providing a legitimate service? All that I request of you and your co-authors is a more balanced look at the role of for-profit loan modification services and how SB 94 unfairly hampers firms and individuals operating in good faith and within the law. I encourage you and your comrades to find a better way to solve this issue; one that does not "throw the baby out with the bath water". Legislative history is rife with over-reactions and over-corrections. I humbly request a measured approach to this issue that protects the rights of all elements concerned equitably.
Regards,
This is ridiculous. If mod companies are so successful, why do they have to charge upfront?? Mortgage companies were never paid until loans were closed. How did they survive?
Fees aren't earned unless the company is successful in helping the borrower acquire a modification which works. Companies can still provide modification services to homeowners. Again, if they are as successful as they claim, not being paid in advance should not be an issue.
The problem with not being paid in advance with many of the business models, is that companies are paying for leads. If they don't get paid until the modification is completed, it disrupts their business model.
Legitimate companies don't have this problem.
I think you are over-simplifying again. Comparing loan origination directly to modification is not completely fair.
Loan Origination:
1. Turn-time = 30 days on average.
2. Less time & effort invested to achieve success. (Much less!)
3. When success is achieved payment is guaranteed.
4. Average income per transaction = $8,000 - $10,000
5. The cost of the transaction generally comes out of the loan amount itself which enables the consumer to amortize this expense over the life of the loan.
Loan Modification:
1. Turn-time = 60 -120 days on average.
2. Much more time and effort invested to achieve success.
3. If advance fee not charged no guarantee of payment whatsoever.
4. Average income per transaction = $1,000 - $3,000.
I don't believe you are perched upon a legitimate moral highground when you impugn up-front fees for loan modification. Comparing loan origination to loan modification is also way off base (covered above). People have always had the right to pay for professional representation in our country and should not be denied the opportunity to do so. A business has the right to charge up front and those who can afford to pay the price should not be denied the right to do so.
Orignally my company was run on the model you suggest. We required payment upon completion. Any guesses as to how often we were paid upon success? I certainly have empathy for the vast majority of our clients who are in very difficult circumstances. We would certainly have to raise our price substantially if we returned to this model to account for the large number of clients that would not our could not pay upon completion.
We are not a non-profit organization. If we did not provide a far superior service to the free services available I would shut down now. Those who cannot afford to pay us do have the option of a free counselor or self-representation still. A business that is ethical and legitimate has the right, in my opinion, to charge up-front. In this niche it is the only way they can continue to operate. The client should research that business well and should examine what the refund policy is before moving forward. Government's place in all of this should be to monitor and regulate the companies in this niche.
What this really boils down to, if YOU are being honest, is that you don't truly believe the services rendered by a loan modification company have any real merit. That is unfortunate as I believe our firm and others like it are doing good work and earning fair compensation in the process. That is the image we, as ethical and effective mod companies, need to change. I am all for legislation that culls the crooks from the industry. It will help my business tremendously as we lose potential clients every day to companies that are over-promising and not delivering anything.
Eliminating advance fees of any kind will only shut down the good companies and leave homeowners even more alone against the banks. I realize that not everyone needs a mod company to assist them. On the other hand are you completely certain that this option should be effectively eliminated?
fagetaboutit...
They can be any of the above. Recently in California, the City of Los Angeles made it illegal to charge an upfront fee as a mortgage or real estate broker. Attorneys may still do so. On the other hand, at the state level Senator Calderon's SB 94 threatens to make it illegal to charge an upfront fee on a statewide basis. I'm working on stopping that piece of legislation, or at least getting modified, pardon the pun. If you want to help, send me an email...
I own a reputable loan modification firm and this will destroy our business. Now, because the politicians are over-zealous and ignorant of how their actions will truly manipulate a fragile dynamic my company and homeowner's truly in need of representation will both lose!
Good job Big Brother! Way to watch out for us little people. The banks win again and everyone else is ...
Nomarac...
SB 94 cleared the judiciary committee on April 21st and went into appropriations on May 18th... if you want further information, please send me an email (mandelman@mac.com) and I'll fill you in...
I am writing to you regarding SB 94 and your involvement with it. I wholeheartedly acknowledge that measures must be taken to protect troubled homeowners from unethical companies and individuals in the foreclosure prevention or loan modification industry. There is no doubt whatsoever that many firms and individuals are operating illegally and unethically. I strenuously disagree with SB 94 in its present form however.
If SB 94 becomes a law honest and hardworking people working in this industry will be unduly punished and a greater number of homeowners will lose their homes to foreclosure or receive only marginal modifications that merely forestall foreclosure. Clearly, you and your co-authors do not believe that loan modification firms (even those that are ethical and compliant) provide any real benefit to their clients. The wording of the bill and comments made at a press conference regarding this issue reveal your sweeping disdain for the entire industry.
You and others have been asserting that troubled homeowners can obtain a modification by working with their lender on their own or with the assistance of a non-profit agency. Certainly there is a kernel of truth in these statements. In some instances there is no need for representation. An individual can also represent themselves in court (the parallel of attempting a modification on your own) or obtain the assistance of a court appointed attorney for free (the equivalent of relying upon a non-profit for modification assistance) but I cannot recall anyone with a measure of common sense recommending either of those choices if the means to do otherwise is available. Those who can afford quality representation have always been able to do so and should not be deprived of that right by heavy-handed legislation. Certainly you can see the parallel and I believe it is a fair comparison. SB 94, in present form, runs contrary to the free-market principles that are emblematic of our state and nation.
I strongly urge you to seek out a number of your own constituents who are experiencing mortgage difficulties and actively become involved in assisting them with a modification. Within this context you will have the opportunity to fairly judge whether or not paying for quality representation has merit. No need to take my word for it, try it yourself and see how difficult it truly is. I also encourage you to work with a troubled homeowner via a non-profit. Again, I believe you will eventually come to realize that although the representatives at the non-profits are often well meaning they are, unfortunately, ill-equipped to effectively assist troubled homeowners in obtaining a truly meaningful modification.
Recently, U.S. Representative Maxine Waters experienced first-hand the frustration and lack of success that a typical homeowner encounters as they try to work with their mortgage lender. I encourage you to watch the ABC News video that documents her brief encounter with loan modification assistance if you have not already done so. It suffices to say that she was thoroughly frustrated and disgusted and felt that her experience (even though she is a prestigious legislator) typified that of most borrowers seeking assistance directly from their lender. Most people are ill-prepared to navigate the lenders processes even if they have the time to do so. In an effort to obtain a balanced perspective on the matter I again encourage you or someone on your staff to become intimately involved in attempting to obtain a resolution on behalf of troubled homeowners. I advise you to become involved in a number of cases from a broad cross-section of lenders/servicers, with and without non-profit assistance, with various loan types, and various hardships in order to gain a realistic perspective.
Is there not a better way to clear the unscrupulous elements from this industry? SB 94 solves the current problem with the subtlety of a club in circumstance where the precision of a scalpel would be more effective. This legislation will surely eliminate the vile elements that are preying upon people in desperate need of help. Just as surely though, it will eliminate the lawful and ethical firms and individuals that are providing real and effective help. Is this the intended purpose of government? To eliminate and hamper businesses that are providing a legitimate service? All that I request of you and your co-authors is a more balanced look at the role of for-profit loan modification services and how SB 94 unfairly hampers firms and individuals operating in good faith and within the law. I encourage you and your comrades to find a better way to solve this issue; one that does not "throw the baby out with the bath water". Legislative history is rife with over-reactions and over-corrections. I humbly request a measured approach to this issue that protects the rights of all elements concerned equitably.
Regards,
Unfortunately, unless writing this letter made you feel better, it will do no good. Sorry.
Fees aren't earned unless the company is successful in helping the borrower acquire a modification which works. Companies can still provide modification services to homeowners. Again, if they are as successful as they claim, not being paid in advance should not be an issue.
The problem with not being paid in advance with many of the business models, is that companies are paying for leads. If they don't get paid until the modification is completed, it disrupts their business model.
Legitimate companies don't have this problem.
Hey do_the_math...
How would we go about adding an "escrow" to the whole process? Some way for the person helping to modify the loan to know with certainty that he or she would be paid when the loan was modified? Can you comment on how we might go about that?
Fees aren't earned unless the company is successful in helping the borrower acquire a modification which works. Companies can still provide modification services to homeowners. Again, if they are as successful as they claim, not being paid in advance should not be an issue.
The problem with not being paid in advance with many of the business models, is that companies are paying for leads. If they don't get paid until the modification is completed, it disrupts their business model.
Legitimate companies don't have this problem.
Hey do_the_math...
How would we go about adding an "escrow" to the whole process? Some way for the person helping to modify the loan to know with certainty that he or she would be paid when the loan was modified? Can you comment on how we might go about that?
Sorry Martin, I didn't see this post. I think an independent third party escrow is a smoking idea. This would resolve most of the issues surrounding advance fees and companies that violate advance fee regulations.
In order to reduce the costs, it would be nice if the State and Federal government would subsidize some of the costs to keep costs down for consumers.
You are definitely on the right track with this type of thinking.
One thing I would like to add is that if the borrowers need emergency legal assistance, that the borrowers have the right to cancel and have funds released for bona fide legal defense or bankruptcy.