HELPING HOMEOWNERS IS AGAINST THE LAW?
The California legislature passed a bill known as SB 94 on October 11, 2009. The law prevents ANYONE (even attorneys) from accepting advance fees for loan modification and loan forebearance work. Since most lenders and brokers are not willing to work on a contingency fee (i.e. hope they get the mod and hope you are happy with the mod and hope you pay for the mod), you can consider this another victory for the lenders!
Here was the governor’s point of view: http://www.prweb.com/releases/loan-modifications/california/prweb2618464.htm
And here is a text to the actual proposed bill: http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_cfa_20090327_152419_sen_comm.html
Interstingly, the California State bar supported the bill. See http://docs.google.com/gviewa=v&q=cache:wFiRUorfdIAJ:bog.calbar.org/docs/agendaItem/Public/agendaitem1000004814.pdf+california+state+bar+sb94+july+22,+2009&hl=en&gl=us
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Well the last year has been pretty crazy in the loan modification business. We have seen lots of companies being shut down by the California Department of Real Estate and California State bar (ex. brokers, attorneys, “attorney-backed” and “attorney-based” law centers and fictional “law groups” etc.) who were found out as being nothing more than scams, shams, and ripoff artists.
Some of the reasons these companies were the subject of cease and desist (or desist and refrain) letters is the following:
-They held themselves out as loan modification specialists and loan modification experts when in fact they had no special skill, training, experience, or track record.
-They took advance fees without the proper advance fee agreement that received a letter of non-objection from the DRE.
-They collected advance fees but failed to properly place funds in a Client trust account.
-They failed to properly provide verified accountings as required by the California Department of Real Estate.
-They failed to have all of the loan modification advertising approved by the DRE.
-They took files that were in notice of default (this applies to the non-attorneys) in violation of the Foreclosure Consultant Law.
-The committed other acts of outright fraud, misrepresentation, deceit and false advertising.
-In the case of Loan Modification Attorneys they may have illegally partnered with non-attorneys (such as brokers and foreclosure consultants) that would not only tout the attorneys services – taking the form of an illegal runner or capper – but also illegally splitting what could be construed as a legal fee, and engaging in other shady conduct that violates an attorneys code of ethics.
-In addition, Post SB94, some entities accepted an advance fee in violation of SB94 which prohibits both attorneys, brokers, and foreclosure consultants from accepting any type of advance fee for loan modification or foreclosure forbearance work.
-They failed to provide refunds when their contracts stated they would, or where verbal representations of 100% money back guarantee were given.
Yes, there were a whole lot of callous and cavalier people/companies raking homeowners over the coals for their own personal gain, and without any morals or scruples. I guess you could say there were a bunch of Bernie Madoff’s in the loan modification business. From what we could tell, the Attorney loan mod scammers often were either the “newbie” Attorneys who had no clue what was going on and didn’t care (and may have had a hard time finding legal jobs in the tough economic climate following law school) and/or 20 or 30 year attorneys who could care less whether or not the State bar stripped their license to practice law (I think some of these attorney violators were racking up so much money, and trying to ship it off-shore for their retirement purposes). In fact, we heard one Southern California Attorney, who was disbarred for his loan modification shennanigans, had over 1,700 loan files that he had charged over $6,000 a piece to help modify their loans (yes, that is about 11 million dollars). This information was relayed to our office by the Federal Trade Commission (FTC) who helped stopped the attorneys scam, and put the joker out of business.
Other attorney/brokers that we have seen have been callous and calculating, and when approached with demands for loan modification refunds, have simply said “if you sue me I will file bankruptcy…” This is the attitude of a lot of scammers. There was one scammer that our office dealt with, Mr. Jason Adelman of Bakersfield (we believe he was runnning a Nevada Company), who agreed to settle his loan modification scam suit, but then disappeared starting up a new “Investment” company in the Bakersfield area. Our information also shows that this guy is a youth football coach and/or little league coach in the Bakersfield area. This guy failed to have an approved advance fee agreement, and failed to perform reasonable services or provide refunds upon demand.
This is just a flavor of the things we saw from the loan modification side of life in 2010. Taking this for what it is, and given the large number of complaints from California homeowners dealing with these types of heartless vultures, it is no wonder SB 94 was passed.
Now some “enterprising” lawyers (one in particular in southern california) have broken their loan modification contract into THREE PIECES (charging for each service after it is performed) in an effort to snub their noses at SB 94. This particular firm is also bringing in about 200 files per month, or so we are told. This is the nature of the loan modification beast in California, and homeowners are advised to be very suspect and wary when dealing with a loan modification company. Do not pay any advance fees for loan modification work to either an attorney, “law center,” “law group,” “Attorney-based” company, foreclosure consultant etc.
In many cases, as a homeowner, you can try to do your own loan modification. Yes, it will most likely not be an easy task as most will testify. However, you should try to contact your lender and see if they are willing to work with you, and submit your financial documentation and see if they will provide you any type of loan modification assistance. Loans are getting modified, but not always on the terms the homeowner wants. If you are lucky, and if you have a bona fide hardship, and meet the financial criteria, you may be able to save yourself some money by doing your own modification.
