Third Party Mitigation Companies Might be the Way to Go

We’ve talked a lot recently about the impact of SB 94 on California’s loan modification industry.

The importance of this bill is twofold. One, it adds protection for consumers. Secondly, it allows third parties to remain in business and be a resource for homeowners.

Both are extremely important, but do you know why a third party company is so valuable?

Consider the following quote from a homeowner in an article at San Diego’s 10news.com:

“You’re willing to take whatever they offer you because you don’t feel like you can haggle with them,” she said.

This is a sentiment shared by thousands – and probably millions – of people. Banks are a tough beast to negotiate with and having a law firm on your side that will represent you can make a world of difference.

Many companies take on clients only after the homeowner tried the loan modification on their own. Fed up with an inability to get results, many quickly discover the exactly what the difference is with an experienced mitigation company.

A good, reputable business won’t sit back and let the bank dictate to them. They will fight for your financial future and ensure the result you get is the best one available given your specific situation.

Federal Government Stepping Up Modification Efforts

Making Home Affordable, the government loan modification program which has met much criticism in its first few months, is getting some much needed attention.

Laurie Maggiano of the Treasury’s Office of Homeownership Protection recently said that a new, streamlined application  is on its way for those attempting to get a loan modification. She also noted that those that don’t qualify for a modification will soon have a new option when federal authorities roll out a new plan.

The news comes shortly after the Congressional Oversight Panel released an unfavorable report on Making Home Affordable’s early progress.

According to DSNews.com, Maggiano believes the streamlined process will significantly help homeowners.

Nevertheless, she said that much tussling between borrowers, servicers and investors would be cut down by that plan and the new HAMP paperwork requirements.

Those new requirements include just two documents to be filled out and signed, a vast improvement over the mountain of paperwork that accompanied early modification applications, Maggiano said.

The site also notes that the unqualified candidates will soon be getting some much needed assistance.

According to Maggiano, the Treasury will offer a schedule of financial incentives to servicers for negotiating short sales or deeds in lieu of foreclosure for the most troubled borrowers in their portfolio that can’t obtain a modification.

California DRE Announces That Advance Fee Agreements are No Longer Valid

For a long time, real estate licensees were able to point to an advance fee agreement on file with the California Department of Real Estate as a sign that their business method had state approval.

That is no longer the case after the enactment of SB 94, a bill that abolishes the standard practice of advance fees.

The following statement can be found on the California DRE’s website (requires Adobe Reader):

“If you are a a real estate broker, or the designated officer of a licensed corporation, who has been issued a “No Objection” letter by the Department of Real Estate for loan modification or other mortgage loan forbearance services, you can no longer enter into these agreements effective as of October 11, 2009, nor can you collect any advance fees for such services.”

Advance Fees Outlawed in California

With Governor Arnold Schwarzenegger’s signature today, Senate Bill 94 became law and hereby abolishes the practice of collecting advance fees for foreclosure assistance in the state of California.

A similar bill was rejected by the governor with the following statement:

To the Members of the California State Assembly:

I am returning Assembly Bill 764 without my signature.

Although I support the prohibition of individuals charging advance fees for mortgage loan modifications, I do not agree with the provision of this bill that will only allow fees to be collected if a modification is successful. This could adversely affect legitimate businesses that provide loan modification services. As such, I am signing SB 94 that accomplishes this prohibition against advance fees without unnecessarily harming legitimate companies.

For these reasons, I am unable to sign this bill.

SB 94 ensures that homeowners have protection against fraudulent business practices while also providing the ability for third party mitigation companies to continue assisting distressed homeowners in need of help.

While it has been known for some time that a decision was coming, it still leaves many companies scrambling to comply with the new law. Advance fees were a common practice throughout the industry.

However, at least one company is conduction business as usual as American Mitigation Law Group’s California loan modification efforts won’t skip a beat. AMLG had previously gone to a model similar to what SB 94 calls for back in May 2009.

Foreclosure Filings Occurring Every 13 Seconds

According to an article from Reuters, more than 6,600 new foreclosures are being filed every day. That works out to a new foreclosure every 13 seconds.

These are the types of headlines normally reserved for the drastic effects of cancer or teenage drinking, but with the foreclosure total nearing 2 million this year, the problem has crossed over into an epidemic.

The same article states that California home prices aren’t likely to rebound to levels seen earlier this decade until 2030.

Delinquencies are on the rise and with the foreclosure market beginning to wreak its havoc on those with prime loans, there is no end in sight.

Sorry to be such a downer, but the news just won’t allow for anything else. Hopefully, we begin seeing some serious improvements in government programs like Making Home Affordable to help homeowners in California and beyond.

Doubts Growing About Making Home Affordable

When the government rolled out its loan modification program in March of 2009, it was a victory for “Main Street.” After seeing so much money go to bail out the institutions that caused all the problems in the first place, Joe Homeowner was finally getting some help.

In California, where foreclosures are especially high, it was a welcome relief and homeowners thought they had a chance to get out of trouble.

Now, doubts continue to rise over the program. The Congressional Oversight Panel, a watchdog group that makes regular assessments of the Making Home Affordable plan has said improvements are necessary to meet the goals and expectations.

Elizabeth Warren who chairs the oversight committee expressed her concerns in an AP article.

“Serious concerns remain about the program’s scope, scale and permanence,” Warren told reporters in a conference call. “In particular it isn’t clear that 500,000 modifications will be enough to put a serious dent in the foreclosure crisis or to dampen the impact of foreclosure on the broader economy.”

It may be that in just six short months, the program hasn’t kept pace with current market conditions. According to the panel’s report, Making Home Affordable “is targeted at the housing crisis as it existed six months ago, rather than as it exists right now.”

There’s also the significant problem of the servicing companies not cooperating. While reports are often circulated that the program hasn’t helped as many people as it should, it’s the fact that servicers often look for ways to deny someone a loan modification that really keeps the program from accelerating. If anything needs to change, it’s the pressure applied by government officials to force more action.

Reject AB 764

Governor Schwarzenegger has a bill on his desk that would stop third party companies from doing loan modifications by way of requiring all payments for services to occur only upon the completion of a loan modification. Martin Andelman had a great perspective on the fallacy of this bill that I encourage you to read. It also discusses SB 94 which is a much more sensible bill that the governor should favor.

The impact of AB 764 is summed well by Andelman in the following:

Just imagine what that would be like as a homeowner.  You find yourself in financial trouble, maybe you get laid off, or your business suffers as a result of the economic meltdown, and your bank isn’t cooperating.  You call around and no one seems to have any answers.  You start to feel panic coming on… you call an attorney.

The attorney, however, says that he can’t represent you because a state law prohibits you from paying him for his services unless the bank grants a modification… and since he can’t be sure what the bank will do or how long it will take for them to do it, he simply can’t take such cases.

How would you feel at that moment?  You needed a lawyer, weren’t allowed to pay one, and so you’re facing your bank alone.

If you want to have your voice heard by the governor, visit http://gov.ca.gov/interact.