Modifying Your Mortgage in California May Get Much Tougher

06 Jul Modifying Your Mortgage in California May Get Much Tougher

New legislation introduced, allegedly at the request of California Governor, Schwarzenegger, will make it tougher to get a mortgage modification in California. This legislation, California Senate Bill 94, includes language that says that attorneys can’t be paid for helping a homeowner apply for a modification until the process is completed!

Previous California legislation had similar provisions for non-attorney consultants who helped homeowners apply for mortgage modifications. Those laws were attempts to curtail the predatory companies that appeared over night, took a large retainer and did little for the consumer. But attorneys are already heavily regulated and there are severe penalties for engaging in such activity.

Forcing attorneys to wait to be paid isn’t necessary. Attorneys are used to being paid for the work they do as it is done; not afterwards. Most attorneys, facing several hours of work, request a retainer from the client in order to insure that the costs and fees incurred get paid.

A standard modification can take three to six months to complete. During that time the attorney is working hard on the matter, has to pay his staff, his office rent, his expenses, and his mortgage! Forcing him to wait until the process is over is asking him to lend money to the client.

Not only is this bad business for the attorney, it immediately creates a conflict with the client. Now, the attorney is forced to get a modification (else he won’t be paid), rather than give the client his best advice which might be to walk away from the house or file bankruptcy if the lender won’t offer a workable solution.

All in all, if this becomes law, I think you’ll see an immediate drop in the number to California attorneys willing to attempt a mortgage modification.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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