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Sentate Bill 94 – Does it hurt the chances for getting Loan Modificaion Help?:

The California Assembly recently passed Senate Bill 94, a bill that aims to protect homeowners from loan modification scammers. However, does it end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which included an “urgency clause” and was set to start immediately. SB 94 prevents companies, individuals, and even attorneys… from getting up front fees or any other form of compensation until after the Loan Modification has been completed.

Supporters of the bill say that the state is currently over run with scam artists who take advantage of homeowners desperate to save their homes from foreclosure by charging exorbitant up front fees and then failing to deliver anything of value in return. In their opinion, by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no doubt that there have been unscrupulous companies that have taken advantage of homeowners in distress, the number of these “con artists” is unclear. It was time for something to be done, but does SB94 fix or worsen the problem?

Supporters, state that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

People who oppose the bill on the other hand say, “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved. Real estate agents get paid through escrow, where is our security”

Take a look in the future…
California’s ALT-A and Option ARM mortgages are just beginning to re-set, one third of these types of mortgages are still set to adjust in the next 24 months! This will cause homeowners payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result.

For more information take a look at SB94: http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_cfa_20090327_152419_sen_comm.html

Does SB 94 end up reducing the number of legitimate firms available for homeowners to turn to? Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners?

To your success,

Oliver Graf
Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360

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