The governor took action over the weekend on two pending bills regarding loan modification. AB 764 was a tough measure with various restrictions, but it was vetoed. SB 94 was signed into law October 11th and is effective immediately as urgency legislation.
SB 94 essentially prohibits anyone (including an attorney or real estate agent) from collecting any fees to perform a loan modification or forbearance until the service has been completed. It also prohibits obtaining any security to assure payment and obtaining a power of attorney. Even if the person assisting you with a loan modification is willing to wait to get paid until the service is done, without a power of attorney, the homeowner will have to do all the work with the lender themselves. Attorneys often take deposits called retainers up front, but do not bill the client until the work is performed. This assures that the bills will get paid; however, the broad language in this bill implies that attorneys cannot collect a retainer to secure payment.
AB 764 was much tougher and required payment be collected only after the modification was successful, so even if the work was done, if it didn't go through, one couldn't collect.
Without a power of attorney or deposit to assure payment, our firm will no longer be taking new cases for loan modifications. We will provide related legal services for foreclosure relief, bankruptcy, wrongful foreclosure, and can provide a consultation to help homeowners pursue a modification on their own. This consultation comes with a copy of our self-written how to guide for performing your own modification.
Unfortunately, the law intended to protect consumers went too far in making it nearly impossible for a homeowner to get even legal assistance in the process.
Chris Barsness, Esq.