Discussion on California: SB 94 Passes Assembly... 62-10, A

Schumpeter Reincarnate Joined: 24 May 2008 Posts: 50053

http://mandelman.ml-implode.co.....es-senate/

Posted: Mon Sep 07, 2009 6:46 pm

My immediate, yet admittedly not well thought out, reaction is to ask our political watchdawgs to add a part two to this law which would prohibit the lenders from paying their attorneys (whether in-house or out-house counsel) until AFTER the homeowner has been thoroughly financially fonged. However, the lenders will always pay their staff of suits, and that is what makes this an unfair law even if part 2 is added.

Look, it really is an unfair fight... in this corner we have desperate and broke homeowners who have no clue how to tell the hype from fact as to their rights and obligations under the note and deed of trust and without even a trainer or coach and in the that corner we have a huge conglomerate of institutions with strong political ties, teams of ivy league lawyers, MBAs, and greedy CEOs who have the single goal of lining their own pockets with cash.

But getting back to the point of my post... by destroying the financial ability of law firms to handle non-litigation negotiations with lenders on behalf of borrowers, this law will do nothing positive for homeowners that could not have been done by more reasonable and well-thought-out means.

As a business model, let’s run through what will happen… a financially strapped borrower goes to a law firm for help, and…

Successful Outcome – Modification
Lawyer is successful with the loan modification. Borrower now has to make monthly payments. Lawyer sends client-borrower a bill. Client has barely enough to pay the mortgage and weighs the options of whether to pay lawyer or tell him/her to fly a kite. Lawyer now forced to decide whether to sue client. Most lawyers will not sue and avoid these clients from that point on.

Unsuccessful Outcome – No Modification
Client is upset at lawyer. Client needs cash to move and cash to put down on a month’s rent plus security deposit. Lawyer sends very unhappy client-borrower a bill. Client calls lawyers office and uses expletives that were previously reserved for the lender’s customer service reps. Lawyer decides to write off the losses and vows never to help a homeowner again.

My firm takes money up-front when we litigate. That money is placed into a trust account for monthly payments of our fees. The client then replaces the money billed against the trust at the end of each month. That assures payment for services, and at least a one month warning if a client decides that the lawsuit is no longer worth it. This will likely become the model for non-litigation mortgage modification work, but it would remain to be seen whether it is practical or soon to be outlawed as well.

Just my opinion, of course…

- Paul

Dud? Joined: 17 Sep 2009 Posts: 1

I feel the same way, my response is just irritation and frustration. I have been working, processing, and negotiating loan modifications for 2 years now. I have helped set up a few companies, and have this thing down to a science. I just got the news, that Oct. 11th, we are done, from my boss. I think of the hundreds of people I have personally helped with modifications, most of whom had tried to do it themselves, and got denied. Hundreds of families were able to stay in thier homes, hundreds of dads, man to man, dad to dad, thanked me that they didnt have to tell thier wife and kids that they failed....Now I'm out of a job, and will have to tell my wife and kids something similiar if i cant find something soon.

This whole time, I get angry when people act like what we do is illigitimate, or criminal. I have never ripped anyone off, and when we wernt able to complete the job, we gave the money back, and did what we could to ease the frustration. I understand there is alot of people who arnt like that, but like you mentioned, how many THOUSANDS of families got to save thier homes by working with companies like ours? How many millions over the next few years will lose thiers because they wernt able to get help?

I've been doing this for quite a while, and I still have a hard time on some of these files. Imagine the nightmare of having no clue even where to start. I dont know. Like you said, dont forget to turn out the lights, and hold on to your donkey, you thought this mortgage crisis in CA was bad now.....

Dud? Joined: 19 Sep 2009 Posts: 1 Location: San Rafael

I notice that non-profits are exempt and that payments from the gov are not considered violations of the advance payment prohibition. I also notice ACORN supported AB 94. Go figure. Watch for non-profits to align with attorneys to skirt this law.

I am a small law office and only took in clients that came to me on a referral basis. Now I will not accept any more loan mod clients. I have plenty of other legal business to attend to from paying clients (at least clients that still can legally pay me for my services).

I expect the scam artists who seemed to have no problem committing fraud will now be scared into being legit by this law. LOL

In reality, its only those legit services that will probably stop at this point.

If I could have at least held funds in my trust account pending a successful loan mod, that would have kept me in the game. As much as I would like to help people for free, I have to feed my family and pay my law school loan from 15 years ago. Thanks California legislature!

Posted: Sat Sep 19, 2009 9:54 pm

RE: "I expect the scam artists who seemed to have no problem committing fraud will now be scared into being legit by this law. LOL"

And as we say in the NRA... where guns are outlawed only outlaws have guns.

My law firm takes cases against loan mod scammers... and the c**p they have pulled was already illegal... adding a few more causes of action to the complaints will not hyperscare them into compliance.

- Paul

Posted: Mon Sep 21, 2009 2:21 am

PaulMolinaroEsq wrote:

RE: "I expect the scam artists who seemed to have no problem committing fraud will now be scared into being legit by this law. LOL"

And as we say in the NRA... where guns are outlawed only outlaws have guns.

My law firm takes cases against loan mod scammers... and the c**p they have pulled was already illegal... adding a few more causes of action to the complaints will not hyperscare them into compliance.

- Paul

So are you saying your firm is a resource for borrowers who have been scammed by illegal mod firms?

If so, attorneys such as yourself will do more to clean up the industry than all regulators combined.

Posted: Mon Sep 21, 2009 5:09 pm

RE: "If so, attorneys such as yourself will do more to clean up the industry than all regulators combined."

I wish private attorneys could do that... but there are some financial problems with the private attorney general concept here... in a typical loan mod scam, the money each INDIVIDUAL is scammed out of is usually a few grand... filing a case... serving the multiple defendants... some out of state... doing written discovery... deposing the scammers... opposing motions and filing motions... and then the jury trial... that can cost the victims some serious money... which of course they DO NOT HAVE.

Thus, filing complaints with state and federal agencies, small claims court, pursuing criminal prosecution, etc. can be more appealing. There are already plenty of laws in place for the state and feds to use. More laws will just take the good guys out of the field.

We get a lot of calls from alleged scam victims, but we select the ones who have the ability to go to the mat and we seriously look at the solvency of the alleged wrongdoers. Collection of judgment money is a major concern… bad guys have a way of changing companies, moving, filing BK, disappearing, and just being plain broke.

- Paul

Dud? Joined: 29 Sep 2009 Posts: 1

I believe many questions would be answered if a list was compiled showing out of the maybe thousand loan modification actually completed, how many had third parties involved. The lenders and servicers keep records on every file, require they open the files with approved loan modification applications and see if a third party was involved. Once this percentage is known, an easy decision should result in allowing these companies to exist or not.