California Mortgage Loan Modification Regulations

In California, the latest loan modification regulations were enacted to help prevent

homeowners from paying for services that are not helping improve their current financial situations. Several homeowners were finding themselves in danger of foreclosure because it became difficult to pay their mortgages, and they were seeking a way to lower their monthly payments. These homeowners sought to hire either a loan modification professionals or attorney.

The New California Law

A problem presented itself because loan modification companies were charging homeowners upfront fees to begin working on these modifications. The fact is that too many consumers were in financial distress and requesting modifications and certain loan modification companies did not have enough personnel on staff to handle all of their clients. As a result, they were unable to complete as many modifications as there were requests for modifications. The government of California stepped in and wrote new loan modification regulations that stated it would be unlawful to charge upfront fees of anyone in foreclosure requesting to change the terms of their loan.

The Addition of Loan Modification Attorneys to the Regulations

Consumers must be aware that attorneys are also under the obligation to perform their loan modification services without charging fees upfront. Before 2009, attorneys were exempt from this regulation, and they had the upper hand over those who needed to show results before they could begin to charge their clients. Now, loan modification attorneys must also demonstrate results before they can charge their clients who are in foreclosure.

What Loan Modification Consultants Must Tell Their Clients

Another way that the California legislature ventured into the loan modification arena concerns the fact that loan modification is something that people can do for themselves. According to the law, loan modification companies must inform their clients that they do not need to hire them to perform this service. They must tell their clients that everything the company does to perform its operations can be done by the clients themselves. If they choose to do so, they can save the fees charged by the modification company or firm although going it on your own means you are responsible for all of the paperwork and must adhere to all deadlines on submission requests.

New Qualifications under HAMP

All loan modification companies and attorneys must also follow all of the loan modification regulations outlined in the federal governments loan modification programs. The latest is the revised Home Affordable Modification Program (HAMP) that recently went into effect on June 1 of this year. The new regulations under HAMP expand the numbers of people who can qualify for a modification, and lenders in California are required to follow it. The new qualifying consumers are:

Those who own rental property

Homeowners whose debt-to-income ratio fell below the required 31 percent

Homeowners who defaulted on their payments with their previous HAMP plans in the trial period

Homeowners who defaulted on their payments with their previous permanent HAMP plans

The new California regulations were set up to ensure that homeowners in distress did not pay for services that were not giving them the results they needed. They also must be given the option to perform these services on their own allowing them to avoid the fees altogether.

by: cdloanmod

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