Mandelman Matters » California Assembly

Banks Kick Consumer’s Butts Once Again – SB 1275 Dies in the California Assembly

Mandelman — Wed, 01 Sep 2010 12:41:48 +0000

Okay, who wants to feel stupid, weak, and helpless? (Oh, I do… I do! Pick me! Pick me!)

Well, good boys and girls, because you will in just a minute.

Let’s start here: The federal government requires banks participating in HAMP not to foreclose on homeowners while they’re being considered for a loan modification.

Now, why that would even need to be a rule is beyond me. What’s next? How about this one: A new law prohibits car mechanics from selling someone’s car while they’re repairing it. Whatever.

Banks, however, could give a rat’s petute about what the federal government wants them to do because the rule is voluntary and has no enforcement mechanism. A voluntary rule with no enforcement mechanism? Wow. I don’t think I can remember seeing one of those before. Actually, it makes total sense that there’d be no enforcement mechanism… since it’s a voluntary rule. See, I’m starting to think like them.
Well, apparently banks aren’t much for volunteering, so they foreclose on homeowners while they’re being considered for a loan modification all the time. Hell, half the time they sell someone’s house while considering them for a loan modification, so comparatively just foreclosing should seem like a day at the beach. It’s one of those basically unsolvable problems servicers are having an impossible time fixing: selling homes while under consideration for a loan modification. It’s like losing file folders full of paperwork over and over again. Oh, dear me. What to do, what to do?

And that seems like… if your car dealership blew up your car while they were repairing it… and then claimed it was a mistake. Oh, my. Did we do that again? Sir, I’m so sorry… I had no idea… Larry… damn it… it was a break job. You threw your cigarette into the gas tank again, didn’t you? Look, we’ve talked about this before… Sir, I’m sorry, it looks like you’ll have to buy a new one.

So, California Senator Mark Leno came up with SB 1275, a bill that would have required lenders to provide homeowners with a fully considered loan modification decision prior to foreclosing. And guess what else… it also would have given homeowners the right to sue their lenders if the bill’s process wasn’t followed.

It was looking good for a while. The California Senate and three Assembly committees approved SB 1275. Yeah, baby. It’s all downhill from here, right? Well sort of…

I wrote an article about the bill some months ago and said, among other things, the following:

So, mail the notice of rights… so homeowners know their rights. Seems like that would be a good thing. Mail the homeowner an application for some alternative to foreclosure, such as a loan modification. Yes, that doesn’t sound like it could hurt anything. Actually check to see if the homeowner qualifies for a loan modification or some alternative to foreclosure. How can that be a bad thing? And when a homeowner is denied a loan modification, mail out a letter telling that homeowner why they were denied. Seems like the only decent thing to do, doesn’t it?

The Center for Responsible Lending issued the following statement:

“The confusion and errors that cost Californians their homes, are devastating to the state’s housing market, but are avoidable and we need this measure to stop further deterioration of the California housing market.”

And in New York this year, the legislature approved a new law that gives the state attorney general permission to sue lenders for repeatedly failing to consider loan modifications in a timely manner and for foreclosing during the modification process.

So we can do this, right? After all, we’re practically ground zero for the foreclosure crisis, right? Please tell me I’m right… someone… anyone?

No, I’m wrong. Even though the bill was supported by EVERYONE but the banking lobby, it was rejected 36-30 in the Assembly. Even after it was approved by the state Senate and three Assembly committees. This time… no… but thank you for playing.

All of the Republicans voted against it, but that’s no surprise… they’re supposed to be in Wall Street’s pocket. All Assembly members who voted yes were Democrats, the other white meat… and NINE DEMOCRATS, all of whom were obviously threatened… I mean lobbied… by bankers, also voted no. Nice job, you spineless, worthless, glad-handing, sycophants. Way to throw your constituents under the bus.

Senator Mark Leno, D-San Francisco, told the San Francisco Examiner that he would continue to pursue a solution to the state’s mortgage crisis in the new legislative session, which will begin in January.

“We think we had a very wise compromise (in the bill), unless your philosophy is that the lenders should not be held accountable and not have repercussions for their actions,” Leno said.

Well, now that you mention it that does have a certain ring to it. Not held accountable and no repercussions… where have I heard that before? Hmmm… I swear I was just reading something that sounded a lot like that… what was it?

Oh yeah… I remember… voluntary and no enforcement mechanism! That’s it! No accountability and no repercussions. I’m starting to feel a song coming on…

Seems to me I’ve heard that song before… Click it, and sing along…

I’ve Heard That Song Before by Frank Sinatra

Mandelman out, out, out, but singing.

More Frank Sinatra music on iLike

Gov. Schwarzenegger Move Will Deprive Homeowners of Legal Representation When Negotiating Loan Modifications

Mandelman — Sun, 05 Jul 2009 14:34:05 +0000

California Senate Bill 94, originally intended to protect distressed homeowners by preventing non-attorneys from charging upfront fees for helping homeowners obtain loan modifications, has been expanded to prevent attorneys from accepting a retainer in advance when representing a client seeking a loan modification.

According to an informed source inside the California Assembly’s Committee on Banking and Finance, the expansion of the bill to include attorneys was demanded by Governor Schwarzenegger’s administration.

Apparently, the committee was told “the (Governor’s) administration said they would not sign the bill unless it prohibited attorneys from accepting funds in advance, in addition to all others mentioned”.

The Commission on Homeowner Representation, a group of law firms that individually offer to assist homeowners obtain loan modifications opposes the bill and plans to testify at the hearing being held by the California Assembly’s Committee on Banking and Finance in Sacramento on Monday, July 6, 2009.

The language in the bill that affects attorneys charging retainers reads:

5) Prohibits persons including attorneys, until January 1, 2013, who negotiates attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:

a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform.

According to the Commission’s attorney members, this provision would mean that law firms would no longer be able to offer to represent homeowners who are at risk of losing their homes to foreclosure in loan modification negotiations with banks and mortgage servicers. “California’s homeowners are the ones losing here,” says Martin Andelman, the Commission’s organizer, who is an outspoken advocate for homeowners. “There’s no precedent for this. This is just the banking lobby influencing our government once again. The banks are required by law to negotiate in their own best interest. Who represents the homeowner’s best interests?”

Advocates of the bill say that homeowners don’t need to hire an attorney to obtain a loan modification from their lender, but those familiar with the realities of negotiating with a bank over the terms of a loan modification say that’s an absurd argument. “There are lots of things I may or may not be capable of doing on my own. That has nothing to do with it. If I choose to be represented by counsel, I have that right, and this bill would deprive me of that right by making it impossible for attorneys to offer the service,” states Andelman.

Shah Peerally, an attorney practicing in the Bay Area, says he finds the bill offensive on many levels.

“As attorneys, we are already regulated. We are officers of the court. We are held to a higher standard. If an attorneys that violate the law can lose their license to practice law. I understand that there have been “scammers” out there taking advantage of distressed homeowners, and that has to be addressed, but the way to address that problem is not to leave homeowners with no legitimate source of legal assistance. The banks will take advantage of them like they did when the put people into these loans in the first place.”

Jeff Miller, an attorney with offices in Pasadena had this to say about the proposed bill:

“Every day we see people who tell us that they can’t do it on their own. They don’t have the skills or the time or the energy or the know-how. Their lenders have told them that no relief is available or their lenders lose their submittals or simply wear them down over time. The lenders’ interests in a loan modification are opposed to that of the borrower. There is absolutely a place in the loan modification, loss mitigation and foreclosure arenas for competent legal counsel.”

Jeffrey Hoffman, a bankruptcy attorney practicing in Oakland had this to say:

“Restricting payments for loan modification services is problematic per se and is an incorrect reaction to the scams and ripoffs that people are suffering from incompetent or dishonest people purporting to offer loan modifications. A far better approach would be to regulate the loan modification industry. This legislation will greatly harm the general public by removing a strong tool available to people for negotiating a good loan modification for them, because attorneys will not be assured of being paid for this service and will thus no longer be able to offer it.”

Here’s a small part of what Penny K. Jariabka, a Loss Mitigation manager who works for attorney Jeffrey Miller, had to say:

“Every lender has different unpublished guidelines which are constantly changing with new programs. How can the consumer keep up with the guidelines? We are a Law Firm and we must fight to stay current and this is our job! I recently spoke with a Countrywide representative who admitted that between the merger, new software, new programs and Bank of America changes, they don’t really know what happened to mortgage loan modification packages submitted in January, February and March. These clients need legal representation to make sure that they have rights and are not lost in the shuffle.

I am shocked that the State of California is even considering passing legislation prohibiting its citizens from receiving legal representation, for any reason. I thought it was a right of any citizen, per the Bill of Rights, to seek counsel, to hire an attorney to represent them if they felt they could not adequately represent themselves.”

And, Andelman says…

“This is yet another example of the banking lobby driving legislation that’s in the best interest of the banks, but harms homeowners by depriving them of their right to legal representation. We’ve seen the banking lobby kill bankruptcy reform in Congress, and then we’ve seen them water down the credit card reform bill as well. Now they want homeowners to come alone to the negotiations over a loan modification. The bank has attorneys, mortgage experts, and professional negotiators… but the homeowner who is often scared, emotional, and unknowledegable should come alone. I can’t believe that sounds like a good idea to anyone, and every single California homeowner should be outraged that the legislature would try to deprive them of their right to legal representation.”

We urge everyone to let members of the California legislature know that they must oppose SB 94, because homeowners need to be represented when negotiating with lenders, and it’s not fair to deprive anyone from being able to obtain legal representation if they so desire. While SB 94 doesn’t make it illegal for a homeowner to hire an attorney, it does make it illegal for an attorney to charge a retainer and that means that no attorneys will offer services related to a loan modification.

Obtaining a loan modification from a given lender can take four months and longer. Billing a client once a loan modification has been obtained is not a valid business model as there is no assurance that a homeowner would pay the bill, and no recourse should the bill not be paid. Making it illegal for a lawyer to accept a retainer when handling a loan modification for a client, would stop attorneys from offering the service, and thereby deprive California’s homeowners from their right to hire legal representation if they so desire.

The only group this provision helps is the bankers, and with the hundreds of billions of bailout dollars WE’VE GIVEN THEM, don’t you think they have enough going for them? Homeowners NEED help. Don’t deprive them of their right to counsel! If it’s not you today… how will you feel if it is one day, and there’s not a lawyer you can turn to for help… because the state passed a law saying that lawyers couldn’t charge for this service the way they do for all others?

Make your views known… send emails to the California Assembly Members below TODAY… and please pass it on… ask everyone you know to do the same… Thank you!

California Assembly Committee on Banking and Finance:

Pedro Nava, Chair (D-35) Santa Barbara

Ph. 916-319-2035

Email: assemblymember.nava@assembly.ca.gov

Roger Niello, Vice Chair (R-5) Folsom

Ph. 916-319-2005

Email: assemblymember.niello@assembly.ca.gov

Noreen Evans (D-7) Napa

Ph. 916-319-2007

Email: assemblymember.evans@assembly.ca.gov

Paul Fong (D-22) Cupertino, Santa Clara

916-319-2022