California SB 94 Loan Modification

Highlights of the recent amendment are as follows;

1. The Bill would expire 01/01/2013
2. A specified 14-point bold type statement regarding loan modification fees would need to be presented to the homeowner

"It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in you loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov"

3. Cannot claim, demand, charge, collect, or receive any compensation until after each and every service that was contracted is performed or that was stated to be performed
4. Only residential real property containing four or fewer dwelling units affected
5 If a loan modification or other mortgage loan forbearance services are offered or negotiated in one of the languages set forth in Section 1632 of the Civil Code, a translated copy of the statement in subdivision (a) shall be provided to the borrower in that foreign language
6. "Foreclosure consultant" defined and means any person who makes any solicitation, representation, or offer to any owner ot perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner do any of the following;

a) Stops or postpone the foreclosure sale
b) Obtains a forbearance
c) Assist the owner to exercise the right of reinstatement
d) Obtains any extension of the period within which the owner may reinstate the obligation
e) Assist the owner to obtain a loan or advance of funds
f) Save the owner's residence from foreclosure

7. "Foreclosure consultant" does not include any of the the following;

a) Person licensed to practice Law in the State of California
b) Person licensed as a Residential Mortgage Lender
c) Person licensed to make loans pursuant to Division 9 of the California Financial Code

8. "Service" means and includes, but not limited to, any of the following;

a) Debt, budget or financial counseling of any type
b) Contacting creditor on behalf of an owner of a residence in foreclosure
c) Arranging or attempting to arrange for an extension of the foreclosure period
d) Arranging or attempting to arranging the time of sale of the property
e) Advising or assisting with the filing of a Bankruptcy
f) Giving any advice, explanation or instruction to an owner regarding postponing of a sale date


At this point, SB94 does not prohibit private party mortgage modification firms from engaging in representing home owners with mortgage modifications. It ensures home owners are informed about free services, regulates the stages of collecting fees by private party modification firms and ensures that the private party modification firm is properly registered and supervised.

However, it is a poorly written and substantially void of any logical reason how it will protect the home owner. The home owner can still and should contract with a reputable private party modification firm to ensure their rights are protected and every available strategy is reviewed to protect the potential loss of their home. This fact is clearly outlined when reading Section 8 above which summarizes the rights, information, assistance and strategies that you may loose as a home owner.

How you should process modifications

SB94 does not state that private party modification firms cannot offer mortgage modification services to the home-owner. It does limit what can be said to the home-owner by a consultant. The latter is easily addressed by utilizing Casi Mod Loan Modification Software which offers financial plans that the home-owner can review and decide for themselves which financial route to take. No consulting of any kind involved. The home-owner may ask you questions, but 'software' is providing the logic.

The exchange of funds for services must occur when these very same services have been completed. Typically, phases may include 1) Interview with the end result of providing a modification package to the Borrower 2) Reviewing documentation and amending financial worksheets 3) Submission of modification package on behalf of the home-owner and/or assisting the home-owner in the conclusion of the modification request. Each phase can be charged a fee as completed. Home-owner funds can be collected in full but must then be placed in an escrow account. After each services is rendered, the trust account can then be billed. Or, the home-owner can be charged when each individual phase/services has been completed.

SB94 did pass and now is in affect.