I’m starting to think that what we have here is a failure to communicate. And just in case it’s my fault, I’m writing this to correct any misperceptions that may or may not be out there. I’m usually not one for drama, but this isn’t a usual situation by any means. THIS IS AN EMERGENCY, by any definition of the word.



I’m not at all sure that the private sector, for-profit loan modification firms have an appreciation for what’s going on in California or across the nation as a whole. To be blunt, I’d be willing to bet money that the entire industry will be gone in six months, give or take. Gone. I’d be willing to bet, but who’d bet against?

I’ve been driving around visiting loan modification firms all over Southern California, meeting with their owners and senior managers, seeing their operations, and there are quite a few who obviously have a lot of money invested in systems, people, overhead… these firms employ thousands of people, and are handling loan modifications for tens of thousands of clients. If I were them I’d be scared to death.

I’ve also assembled a team that is spending its days gathering data from all 50 states, identifying loan modification firms, checking their backgrounds and status, collecting data on their numbers of clients, and loan modifications completed by month. I’m getting ready to lobby on behalf of the millions of homeowners who need access to for-profit loan modification firms, through a newly formed nonprofit organization called “Mandelman’s March”. (Most of you have received information on this, but if you haven’t, now would be a good time to get in touch.)

But, too many loan modification firms are reacting as if they’ve got all the time in the world, or some other plan they’re not totally sure of. They’ve got their own opinions. They’re doing it right. They’re a law firm. Oh please… I’m sorry to say this, but if that’s you… you have lost your mind. I’ve been a highly paid strategist and writer for 20 years. Fortune 500 companies pay me to analyze situations such as this and develop strategies to prevail. And I’ve got people at loan modification firms with opinions?

All of a sudden, people running loan modification firms think they know something about this type of communications strategy? Really? Are you sure? I mean, I don’t know enough to get my own mortgage modified, but you know enough to assess this situation and craft and implement a strategy to combat what’s happening out there… right now? You guys aren’t even teamed up enough to get out of first gear. It’s time to wake up to that fact.

Oh sure, there are many that are concerned, they tell me… but not nearly as concerned as they should be. The fact is… even if they get on board today, it may already be too late. So, as far as waiting… you’re waiting on death row.

I’ve spoken with various representatives at the state level and EVERYONE believes SB 94 will pass without any problem whatsoever. At the federal level, no one is an advocate of the private sector modifying loans for a fee. Everyone has bought into the nonprofit and call-your-bank-directly mantra. It’s a real problem.

And yet, too many loan modification firms tell me they want to fly under some imaginary radar, or wait to see how things go… or even are simply too busy to make this a priority. I think everyone should understand that I’m going to try to have an impact at the state and federal levels, I’ve been writing about it for months, so I’ll either have more resources with which to work… or less.

In simple terms… the loan modification industry has allowed itself to get into a world of sh#t, and now it must dig itself out in order to survive. I’ve been ranting about this for more than six months and still nothing has been done on an industry wide basis. At issue, of course, is the advance fee aspect of the transaction, but that is really secondary to others. Let’s look at the forces at work here:

1. To begin with, the country’s leadership has made it clear that for-profit loan modification firms are simply an unnecessary component in the battle against the rising tide of foreclosures. Something not needed at all, like a store that sells tap water. Based on what’s been said by the administration and countless others, the advance fee issue notwithstanding, there is absolutely no reason for a for-profit loan modification firm to exist.

2. Next is the “if you have to pay, walk away,” mantra, that began with President Obama and can be seen during the previews of coming attractions in the movie theaters of nine or ten states, including California. Clearly, it is the position of the federal government that loan modification services should in all cases be available at NO COST to the homeowner.

3. This issue can also be seen at the state level, most notably in California, where Senator Ron Calderon, Chair of the Senate Banking, Finance and Insurance Committee, has thrown his considerable weight behind SB 94, a bill that would prohibit those regulated by the state’s Department of Real Estate, from charging advance fees related to loan modification services under any circumstances. There is an exemption for attorneys charging a retainer, however, as one prominent Southern California attorney stated in his letter to the California Bar:

Subject: Senate Bill 94
Importance: High

I have been practicing law in California since 1972 and have never before been so upset by a piece of state legislations as I am about SB 94.

This bill, on its face, is meant to protect consumers from being taken advantage of by dishonest loan modification companies, who charge a hefty advance fee and perform absolutely no service for the already distressed homeowner.

HOWEVER, that is not all this bill does, unfortunately.

I know there is a specific exclusion for attorneys, from the definition of foreclosure consultants. But there is no specific exclusion for attorneys from the applicability of the law. Having taught Legislation at Pepperdine Law School, and having been both a law school dean and professor for well over a decade, I can say that there are clear problems in the language used in this bill, as to whether some aspects of it possibly be applicable to attorneys.

“As an attorney having worked in the field of Real Estate and Loan Modification, I can quite easily see the government being permitted by a court to apply the limitations of SB 94 to attorneys, in the active practice of their legal careers, when they work on a loan modification issue, being prohibited from collecting a retainer fee for their Client Trust Account, or even from collecting a Power of Attorney, which would be absolutely necessary in order to represent a client in negotiations with a lender.”

The bill, in the Legislative Counsel’s own Digest, on page two, applies to “any person”. There is no limitation, exception, or definition of that, which would exclude attorneys, except from the definition of foreclosure consultants.

I am requesting that the State Bar of California take an active part in opposing this bill, or at least having its language amended, to clarify that attorneys are specifically and completely excluded from any of its applications.

And is the State Bar doing anything to oppose SB 94…

Not a damn thing!

4. The lenders and servicers are clearly opposed to private sector loan modification firms assisting clients with their loan modifications. The amount of evidence substantiating this claim has grown mountainous and is common knowledge in the industry. It can therefore be assumed that it is the banking lobby that is having the influence on the legislatures whose outcome seems so one-sided and opposed to the interests of homeowners. The banking lobby is among the most powerful in Washington and around the country, a lobby that should not be challenged overtly or through traditional channels.

5. Although no aggregate data has yet been compiled, the number of homeowners being “scammed” by a fraudulent loan modification firm is being described as something close to “skyrocketing”. The actual number is not yet known, so combating this nebulous charge has been ineffectual to-date. It seems that the number is certain to be at least several thousand nationwide, which may or may not be considered high depending on your perspective, however, there is no question that there are many legitimate and reputable loan modification firms operating across the country and they are helping tens of thousands at the very least.

6. The industry itself is young, with the “old-timers” having opened their doors in late 2006 or early 2007, and it’s not at all unusual to find firms with less than one year in business under their proverbial belts. Additionally, many that have come to the industry, not surprisingly, have come from the mortgage industry, an industry that’s known more for competition than cooperation, for building sales more than building trusted relationships. And these traits can now be widely seen throughout the loan modification industry.

7. Fear has taken hold of the loan modification industry to varying degree, and the fear appears to manifest itself in disjointed efforts that are often ill conceived or embarked upon without clear strategy or well-defined objectives. Strategic planning is essentially nonexistent, and alliances are forming in pockets, which does little to foster trust among the broader industry. The industry’s operating models, being divided between law firms and DRE regulated enterprises then exacerbate this situation, and the personnel at many firms seem to have started buying in to the idea that theirs is an industry doing as much harm as good.

8. Homeowners are becoming increasingly confused by the mixed messages coming from all directions. Many have heard from friends, family and other key advisors that private sector loan modification firms have saved others’ homes, but the president says they’re scams by virtue of how they charge. State regulators say to use an advance fee agreement, while the Treasury Secretary says don’t pay a dime. Homeowners try to contact their banks directly to no avail. They call government help-lines only to find themselves feeling helpless. The net impact is reduced call volumes being reported by all loan modification firms across the country.

9. The legislative environment is anything but friendly and forgiving. Loan modification firms defending themselves and their industry appear to be defending their own financial interests more than anything else. It should be understood that both the media and politicians have clearly backed away from the issue, and it can be assumed that absent any quantifiable evidence to the contrary, it is not an issue that anyone wants to touch unless on the side of blanket protections for consumers.

10. California CIVIL CODE SECTION 2945-2945.11 covers the conduct of “foreclosure consultants”. Section ‘a’ of the code states:

2945. (a) The Legislature finds and declares that homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded pursuant to Section 2924 until the time surplus funds from any foreclosure sale are distributed to the homeowner or his or her successor. Foreclosure consultants represent that they can assist homeowners who have defaulted on obligations secured by their residences. These foreclosure consultants, however, often charge high fees, the payment of which is often secured by a deed of trust on the residence to be saved, and perform no service or essentially a worthless service.

This section of the code clearly shows basis for the prohibition of advance fees. To the untrained observer, the job of the foreclosure consultant and the job of the loan modification firm are at least similar, if not essentially identical. So, logic dictates, to some at least, that the same law and restrictions that apply to one should apply to another.

(b) The Legislature further finds and declares that foreclosure consultants have a significant impact on the economy of this state and on the welfare of its citizens.

“Foreclosure consultant” is essentially defined as any person who makes offers to perform for compensation or who performs for compensation any service to:

  • Stop or postpone the foreclosure sale.
  • Obtain any forbearance from any lender.
  • Assist the owner to exercise a right of reinstatement.
  • Obtain any extension of time for the owner to reinstate his or her obligation.
  • Obtain any waiver of an acceleration clause.
  • Assist the owner to obtain a loan or advance of funds.
  • Avoid or ameliorate the impairment of the owner’s credit.
  • Save the owner’s residence from foreclosure.
  • Assist the owner in obtaining any remaining proceeds from the foreclosure sale.

Among other things, the code makes it a violation for the foreclosure consultant to: Receive any compensation until after the foreclosure consultant has fully performed.

So… what’s it going to be? My group is on the phone every day trying to help bring firms together under Mandelman’s March. But everyone needs to help here. Get in touch today. Make yourself available. We don’t have a profit motivation here… you guys do. Let’s get moving or let’s give up, but this middle ground is going to fail for sure.

Oh and look at today’s news from Colorado… while you’re “thinking about what to do,” here’s what’s happening:

Aurora Loan Firm Hits Jackpot

Aurora Loan Services, which engaged in risky lending, to receive incentives to help refinance mortgages.

The U.S. Treasury has pledged $798 million in incentives to Aurora Loan Services LLC of Douglas County for help in refinancing homeowner mortgages, according to The Associated Press. The firm’s risky lending practices, including allowing low down payments and requiring no income documentation, were part of a widespread Lehman strategy involving mortgage-backed securities that led to Lehman’s bankruptcy.


So, are you going to call me or what? I’ll keep trying… I never give up. But someone had to say something blunt. I’m sorry if I’ve offended you, but it’s time to wake up. Nothing you’re doing at work today is more important than joining Mandelman’s March.

We need your data.

We need your participation.

We need access to your satisfied customers.

We need you financial support.

And we need it now… like yesterday.

Email me:

Or call me at 714-904-2288

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