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State Assembly Fails to Pass Bill Requiring Loan Workout Decision Before Foreclosure

September 8, 2010

As San Bernardino loan modification lawyers, we were backing Senate bill 1275 in the California state legislature. This bill would have required lenders to make a decision on a pending loan modification request before foreclosing on the home. Unfortunately, as the San Francisco Chronicle reported Sept. 1, the bill failed to pass the state Assembly by a vote of 36-30. Authored by Democrat Mark Leno, the bill was supported by consumer advocates but opposed by the California financial and mortgage industries. The vote was along party lines, the article said, with 12 assemblymembers abstaining, all Democrats. Leno said he would continue to work on foreclosure and mortgage issues in the new legislative session that starts next January.

Leno's bill addressed a complaint common among homeowners: that while they are waiting for word on a loan modification from one arm of the lender, another arm forecloses on the property. In a few cases, the homeowner has been granted a loan workout while the foreclosure happens. No federal law currently addresses this issue, and while the federal HAMP requires no foreclosures during the modification process, it has no enforcement arm. SB 1275 would have required a fully considered decision on the loan workout before a foreclosure, and given homeowners the power to sue if they did not receive such a decision. The banking industry, in lobbying against it, said the bill would have allowed lawsuits for technical violations and could unnecessarily delay foreclosures when homeowners are not eligible. Leno said he felt there was a good compromise in the bill, "unless your philosophy is that the lenders should not be held accountable and not have repercussions for their actions."

Our Downey loan modification attorneys think this is likely the philosophy behind the banking industry's lobbying. Indeed, there may be meritless lawsuits if homeowners are allowed to sue, but there are meritless lawsuits in every area of the law. Our system has ways to weed out this kind of claim early in the process, and those would apply to SB 1275 lawsuits as well. We suspect that lenders' real problem was with the possibility that they would have to answer to a court of law when homeowners are foreclosed in violation of the proposed law (and of HAMP rules). This is not an idle speculation; this bill exists precisely because this actually happens and is commonly reported in the media. This is usually portrayed as a bureaucratic mistake by the lender. But if lenders care enough to actively oppose preventive measures in the Legislature, we might conclude that it is an intentional, deceptive choice -- or at least that lenders prefer to continue behaving with gross negligence.

If you're seeking a loan modification, but your lender is behaving with this kind of incompetence or indifference, you should call Howard Law PC for help. We have helped clients in California seek loan modifications since the beginning of the housing crash. During that time, we're proud to say that we have helped many individuals and families win changes to their interest rates, principal, repayment terms or other parts of the loan structure. Many clients come to our Garden Grove loan modification lawyers frustrated at the lack of response they have gotten on their own. We're happy to say that we've been able to help even in this situation, thanks in part to our status as attorneys. Lenders and loan servicers pay more attention when a lawyer is on the case, and whenever necessary, we sue to ensure that we have their full attention.

Howard Law offers free, confidential case evaluations, so you can speak to us about your rights and your case at no financial risk. To learn more or set up a meeting, call us today at 1-800-872-5925 or send us an email today.