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California Considering Law Banning Foreclosures Before Loan Modification Decision

June 11, 2010

Our Moreno Valley loan modification attorneys have worked with distressed homeowners for well over a year, from the beginning of the mortgage crisis. In that time, we've heard numerous complaints from borrowers about lenders that grant a loan modification while also pursuing a foreclosure, which sometimes means the home is repossessed even while homeowners believe they're on the path to financial security. Lender policies and the federal Home Affordable Modification Program ban foreclosures before a loan modification is complete, but it happens anyway, due to poor intra-lender communications and a lack of independent oversight. Now, as the San Francisco Chronicle reported June 2, the California legislature is considering yet another ban, but with some teeth: Borrowers would be able to sue lenders that foreclose in violation of the law.

SB 1275, sponsored by Democrat Mark Leno of San Francisco, would also set down detailed modification rules. Not surprisingly, lenders oppose it, saying it codifies HAMP, which has been changed several times since it was introduced in early 2009. A banking industry spokeswoman also said lenders oppose the lawsuit provision, because they believe it would create lawsuits for minor technical violations and further delay foreclosures. Leno, the bill's sponsor, said the lawsuit provision is needed because HAMP does not hold lenders and servicers accountable for violating the foreclosure ban. In addition, the bill would cover the 25 to 30 percent of borrowers who are not eligible for HAMP.

To illustrate the problem, the article tells a story about a Bay Area homeowner who was literally on the phone negotiating a loan modification when a real estate agent came to the door and told him the house had been foreclosed. Jose Vega said he handed the agent the phone and told him to work it out with the lender, JP Morgan Chase. The Chase representative on the phone knew nothing about the foreclosure. Chase eventually halted the foreclosure and the Vegas are still in the house while they wait for a decision. A Chase spokeswoman said the bank's policy is not to foreclose while considering a loan modification.

As this article and numerous others show, policies like that have done nothing to stop improper foreclosures. That's why our Fontana loan modification lawyers support the private right of action created by SB 1275, and any other accountability tools. As things currently stand, lenders like Chase who break their own policies -- not to mention the requirements of HAMP -- face zero consequences. This is equivalent to not having any such rule in the first place. The right to file private lawsuits would give consumers the ability to enforce their rights. If this creates frivolous litigation, as the banking spokeswoman implied, we believe courts are well-equipped to filter bad lawsuits from good. As for codifying HAMP, we don't believe there's anything wrong with codifying a valuable provision of the law (and applying it to all homeowners), regardless of whether the law later changes.

At Howard Law PC, we are proud to represent borrowers who are seeking to keep control of their homes and their finances through a loan modification. After representing troubled homeowners throughout the housing crisis, we have come to believe that lenders do not particularly want to grant loan modifications, and that's why so many homeowners have encountered frustrating delays, contradictory statements and major mistakes that delay or deny financial relief. Our Escondido loan modification attorneys help borrowers get their requests taken seriously. In many cases, bringing a lawyer into the negotiations gets attention because it shows the lender that you understand your rights and are willing to enforce them in a court of law, if necessary. In fact, we prefer to avoid going to court when possible, but if our clients are victims of predatory lending, gross negligence or other wrongdoing, we absolutely will protect their rights.

Howard Law offers free, confidential case evaluations, so you risk nothing by speaking to us about your case and your options. To set up a meeting, call us toll-free at 1-800-872-5925 or contact us through the Internet.