by julie on October 1, 2009
Both the Senate and House in California have passed SB 94 and AB 764, designed to stop the mortgage modification process in California. It would prohibit loan modification companies, including lawyers from collecting any up-front fees for homeowners that are delinquent on their mortgage, and most likely facing foreclosure.
Once the govenor signs the bill then the law would go into effect immediately. This ultimately will shut down the private loan modification industry in California, forcing homeowners to either do loan modifications themselves or turn to government-run organizations that for the most part has been hugely unsuccessful in getting a loan modification through.
We have spoken with various loan modification companies and most indicate they will just close their doors if they cannot collect up-front fees. How can a company make payroll if there is no money coming in? Typically loan modifications take 4-6 months to go through.
Would you want to go 4-6 months without a paycheck?
Legislators are not in touch with reality if they think the prohibition of upfront fee collections is a solution to the problem.
We predict that the passing of this bill will create mahem in the foreclosure world – leading to higher forclosure rates in San Diego, and Orange County.
Stay tuned for the wild ride!
According to the Mortgage Bankers Association, California remains at the top of the list for both foreclosures and unemployment. Unemployment is a principal reason for the continuing high foreclosure activity throughout California. Loan modifications have slowed the pace in San Diego, but with the new legislation trying to be passed in California, and at a federal level that would prohit upfront fees from being collected, the loan modification business may be shut down entirely, leaving homeowners little choice but to sell or be foreclosed upon.
In San Diego loan modification companies are concerned that if the ban on up-front fees are passed they will have to close their doors. Because loan modifications can take upward of 6 months, a company would have to have deep pockets to run a business without income for that long. It would be nearly impossible to pay employees without some sort of regular income. So if you are in California and looking for a loan modification, best to work quickly before this legislature is passed. Other alternatives to a loan modification in San Diego and other parts of California would be to do a forensic loan audit to see if there is potential fraud in your mortgage. This can be used in a short sale or to pursue legal action against the lender.
