Upfront Fees on Loan Modifications NOW ILLEGAL in Los Angeles

Posted on May 3, 2009. Filed under: Foreclosure Defense, Fraud, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law, Politics | Tags: , , , , , |

The Los Angeles City Council has made it illegal for mortgage and real estate brokers to charge an upfront fee when offering to help distressed homeowners obtain loan modifications. This effectively puts the loan modification business for real estate and mortgage brokers out of business. Gone. Bye-bye…

In case anyone thinks that’s not the case, let me explain.

Once a mortgage is modified, what would a loan modification company do if the customer didn’t pay the bill? Threaten to ruin the homeowner’s credit? You must be kidding. These are people that almost lost their homes. Their credit, you might consider, already leaves much to be desired. Take them to Small Claims Court? Sure, why not. As long as you understand that the best-case scenario is that you’re going to get like $20 a month, Small Claims Court might work out fine. Of course, when the homeowner doesn’t make the $20 payment, you’ll be going back to court or chasing a homeowner around for $20… well, plus late fees, so let’s say $24.

And please don’t tell me that people will pay their bill because they’re just that appreciative of the work that was done. Because I have a friend who runs a hospital, and 50% of his bills go unpaid all the time. Why do you think hospitals are so interested in what kind of insurance you have? Because they know that 50% of the patients won’t pay their bills, that’s why.

Helping someone with a loan modification without an upfront charge is something a nonprofit organization might do, but it’s not a business plan for a for profit entity… unless of course you follow the hospital pricing model and start charging $7,000 for a loan modification. Then when half don’t pay, you’ll be okay.

Yep, now that’s what I call a law that’s helping troubled homeowners. Thanks Mayor Villaraigosa! Good thinking there. You’re a smart one, I’ll give you that. Did you have anything to do with the Hope-4-Homeowners program, by any chance? Just wondering…

Here’s what I found to be the most amazing aspect of the story in the LA Times. It said: “Some of the services are legitimate, officials said, but others are not.” SOME are legitimate? OTHERS are not?

via Mortgage & Real Estate Brokers: Upfront Fees on Loan Modifications NOW ILLEGAL in Los Angeles » Mandelman Matters.

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