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California law bans upfront fees for loan modifications

Shared by Jerry on Thu Oct 22, 2009 3:14 am

Hi everyone,

A new law, prohibiting collection of advance fees by providers of loan modification services, has come into effect in the state of California. The Senate Bill 94, as it is known, now makes it illegal for any person or firm to receive upfront fees from consumers, until their promise of delivering loan modification assistance is fulfilled.

The bill not only applies to persons or firms offering loan modification services in California, but also to those operating outside of California and offering such assistance to California consumers. The law also makes it mandatory for the modification companies to let the consumers know that they have the option of calling their lenders directly to request for a modification of their loan terms. The providers of loan modification services are also mandated by the law to disclose to the consumers that similar services can be obtained from HUD-approved housing counseling agencies, free of charge.

Thanks,

Jerry

Source: http://www.reuters.com/article/pressRelease/idUS186353+21-Oct-2009+BW20091021
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Mini Profile  sara
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PostPosted: Thu Oct 22, 2009 3:30 am    Post subject:

Hi Jerry,

This is indeed a great news for the homeowners of California who are looking forward to modify their loans. I hope this is just a beginning and such laws would be passed in different states to save the homeowners from paying huge amounts to modify their loans.

Senate Bill 94 will help crack down on the illegal practices of the lenders and brokers. Lenders and brokers took advantage of the desperate homeowners who were trying to avoid foreclosure by charging them illegal fees. However, with the passing of this new law, lenders will not be able to to demand, charge, claim, collect, or receive any advance fees unless they have completed the process of loan modification. Moreover, if the lenders are not following this law, then borrowers can report their illegal activities to the Department of Real Estate.

Take care.

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Mini Profile  Samantha
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PostPosted: Sat Oct 24, 2009 6:02 am    Post subject:

Well, I understand that the ban on upfront fees (for modifying mortgages) may protect borrowers from loan modification scams. But it may inflict losses on legitimate companies and lenders who're out there offering modification services. We've had several laws earlier but I doubt how much they've helped to get rid of scams and frauds. Anyway, let's hope that this law does some good to borrowers who're on the verge of losing their homes and can prevent it by having their loans modified.

Samantha

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