Upfront Loan Mod Fees Banned
INDUSTRY NEWS, REAL ESTATE LEGISLATION
October 14th, 2009
Governor Schwarzenegger signed SB 94 into law a couple days ago which, among other things, prohibits anyone from taking an advance fee for promised loan modification services. Prior to this bill’s enactment, attorneys and some real estate agents could charge borrowers an upfront fee typically ranging from several hundred dollars to several thousand dollars for promised loan modification services.
The problem that unfolded when these individuals or companies offering assistance to distressed borrowers would collect a fee and do little or nothing leaving the client in a deeper financial hole than before. Rather than hire someone to negotiate a loan modification, borrowers should work directly with their lender to seek a rewrite of their loan terms. The modification typically involves converting an adjustable rate loan to a fixed rate, reducing the interest rate and/or extending the term which lowers the monthly payment. Borrowers should seek a reduction in principal if the property is worth less than what is owed. More lenders are willing to consider a reduction in principal in light of the fact many loan modifications are failing because borrowers still can not afford the revised payment.
In the event borrowers need assistance with a loan modification, they should seek out non-profit credit counselors or governement organizations set up to assist homeowners. HOPE NOW is one such organization. The bank bail out package includes incentives for lenders assisting borrowers seeking loan modifications. Now that banks have shored up their balance sheets, they should be more cooperative with borrowers seeking loan modifications involving loan balance reductions.
Call law enforcement if anyone asks for a fee upfront to assist you in a loan modification. The Department of Real estate is currently investigating more than 1300 complaints regarding loan modification fraud. Don’t pay anyone anything, it’s the law!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
