Loan Modification Suggestions - California Legislation Update


In an effort to help consumers the California legislature passed and the Governor signed into law Senate Bill AB 94 on October 11, 2009. Indeed, the problems with "Foreclosure Counselors" have been rampant. The remedy will now be to prohibit not only unlicensed individuals and/or real estate licensees from charging advance fees, but attorneys as well.

There is an implicit assumption that attorneys should be willing to work on cases, potentially for years, without payment or any effective means of collecting payment. After all, it is very bad form to sue clients, a practice that often results in cross complaints.

Although attorneys were necessary to other operators to facilitate their ability to charge advance fees, and many California attorneys have been identified by the State Bar as under investigation or sidelined from practice, [see California Bar Journal articles on our News Feed web page at:

for gross abuses of the public, this legislation is disturbing.

We have long argued that the loan modification business is NOT a level playing field between the lender and borrower. This enactment makes private counsel completely unavailable for all intents and purposes. What has become of our principles protecting freedom of contract and right to counsel? Granted the later applies to criminal representation, but in loan modification there is also a great deal at stake for the borrower.

More encouraging is new legislation proposed in Senate Bill 1588. This will set up a system of mediation between lenders and borrowers by presumably qualified mediators. If the mediator recommends a modification and the lender rejects it in bad faith, the borrower has access to an expedited court action.

QUERY: When in this process does the borrower get to have an attorney?

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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