SB 94 & Fees

LOAN MODIFICATION FEES & SENATE BILL 94

My law firm takes its responsibilities to its Clients and the community very seriously.  I support legislation, like Senate Bill 94, aimed at protecting homeowners from loan modification scammers.  During my years of assisting homeowners I have heard story after story about desperate homeowners that were taken advantage of and/or ripped off.  I could literally write a book.  Every time I think that I have heard it all, a homeowner will contact me with a new story that shocks my conscience.  The audacity of scammers and their blatant and knowing disregard for the rule of law is appalling.     On October 11, 2009, a new law, Senate Bill 94 (“SB 94”) went into effect which prohibits, anyone in California, even law firms from accepting fees in advance for loan modification work or activities.  While SB 94 was very clear about the activities of non-attorneys, SB 94 was ambiguous as to how attorneys could charge for loan modification services.  In an effort to clarify the law for both attorneys and consumers, the State Bar of California has recently provided its interpretation of SB 94 on a consumer information web page located at http://www.calbar.ca.gov/Public/ConsumerInformation/LoanModificationFraud.aspx.  This page answers many of the questions that consumers have regarding loan modifications and how attorneys can charge for them.

While being unable to collect fees or put them into a retainer will potentially create a burden on my law firm, in that I must actively pursue clients legally for failure to pay for services after I have performed the contracted work, I believe that the protections to consumers created by SB 94 outweigh the burden to myself and other attorneys willing to assist homeowners with their loan modification efforts. 

Further, SB 94 requires the following notice be supplied to every person seeking loan modification assistance pursuant to Civil Code Section 2944.6:

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 your 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.

This statement is very true.  Homeowners do not need to retain an attorney or other loan modification expert to attempt to obtain a loan modification.  Homeowners can try and deal with their lender themselves or by using HUD or other nonprofit agencies.  Homeowners can also visit http://keepyourhomecalifornia.org/ in an effort to see about specific California programs that might help. 

Most of my clients have already tried these avenues and are either frustrated, stressed out or have lost faith.  I want to be very clear about one thing, not every homeowner can be helped.  There are many homeowners who simply do not qualify for loan modification or whose chances at obtaining a loan modification are very low no matter what I do.

For those homeowners that I think I can help, consistent with SB 94 and the California State Bar’s interpretation of such, I will not accept a fee until the contracted loan modification services have been completed.  I actually go a step farther than the California State Bar’s interpretation by not accepting a fee until the loan modification services have been completed resulting in a positive result to the homeowner.  My motto is, “If the homeowner wins, then I win.  If the homeowner loses, then I lose.”