Other Highlights
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April 28, 2009 (213) 978-0741
MAYOR VILLARAIGOSA SHUTS THE DOOR ON LOAN SCAMS ACROSS THE CITY
New measure will protect homeowners at-risk of foreclosure and prevent expansion of fraudulent loan modification practices in LA's neighborhoods
LOS ANGELES – Mayor Antonio Villaraigosa today joined City Council President Eric Garcetti to announce a path breaking city ordinance to increase protections for Angelenos against fraudulent mortgage loan modifications. This measure – the first of its kind in the United States – fills a critical gap in the regulation of mortgage consultants and grants rights to homeowners at risk of foreclosure.
Joining the Mayor and Councilmember Garcetti were City Attorney Rocky Delgadillo; Leora Freedman, Staff Attorney from the Consumer Law Project at Public Counsel; Holly Fujie, President of the Board of Governors of the State Bar of California; and representatives from local banks, non-profits and legal aid groups. Several homeowners who have fallen victim to loan modification scams were also in attendance to share their stories.
“It is high time that elected officials, non-profit organizations, and banks work together to shut the door on loan scams and foreclosure fraud once and for all,” Mayor Villaraigosa said. “The loan modification ordinance protects our homeowners, imposes harsher penalties on scam artists, and informs Angelenos of their rights as residents of this City. We must use every tool at our disposal to help residents keep a roof over their heads, keep money in their pockets, and stand on a steady foundation long into the future.”
The ordinance is a direct response to the dramatic increase in mortgage loan modification scams that has taken place since late 2008. The measure strengthens the protections available to local homeowners and addresses a significant loophole in state law.
Currently, state law regulates the activities of mortgage consultants only after a Notice of Default has been filed for a property. However, in the current crisis, crooked loan modification consultants have begun to target distressed borrowers even before the notice of default period. As a result, there has been a growing need to increase the consumer protections available to these borrowers and to discourage fraudulent activity.
"This is truly one of the worst parts of the foreclosure crisis – so-called 'consultants' who take advantage of homeowners who are already in a difficult, stressful financial situation," said City Council President Eric Garcetti. "This ordinance will help protect homeowners seeking help with modifying their mortgages, and gives them better recourse against consultants who are really nothing more than scam artists."
Key Provisions of the Ordinance
1. The ordinance makes it illegal for mortgage consultants to charge an up front fee for their services.
2. The ordinance requires a written contract.
3. Homeowners must be given the right to cancel the contract within a 7 day cancellation period.
4. The ordinance increases notification requirements. The right of cancellation must be written in the contract as well as a passage alerting the borrower to the fact that free loan modification services are available from HUD-approved housing counselors.
5. Mortgage consultants cannot take a lien on the personal property or the real estate of a borrower as a form of payment.
6. The ordinance provides for a private right of action that includes three times the amount of damages, attorneys’ fees and costs of litigation.
"The State Bar is doing all it can to support access to legal assistance for victims of the mortgage foreclosure crisis,” said Holly Fujie, President of the Board of Governors of the State Bar of California. “It is also acting together with federal, state and local law enforcement and regulatory agencies such as the Los Angeles District Attorney, the DRE, the FTC, the state AG and HUD to prevent unscrupulous attorneys from taking advantage of these victims."
"We commend the City of Los Angeles for taking this step to reign in predatory companies that seek to take advantage of homeowners desperate to save their homes," said Alan Fisher, executive director of the California Reinvestment Coalition. "With these restrictions on bad practices, and a private right of action for victimized homeowners, Los Angeles is providing some meaningful protections for its residents. At the same time, this highlights the need for the state legislature to pass stronger consumer protection bills than those currently under consideration."
“The Ordinance being voted on by the City Council today is designed to ensure that Los Angeles residents will not be exploited by the latest scammers,” said Leora Freedman. “These so-called ‘consultants’ promise the moon and they assert that their service is better than any free service, or that they have an "in" with the lenders. Honest help is available and it is free. The City's ordinance will ensure that our residents don't throw any more good money after bad.”
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April 28, 2009 (213) 978-0741
MAYOR VILLARAIGOSA SHUTS THE DOOR ON LOAN SCAMS ACROSS THE CITY
New measure will protect homeowners at-risk of foreclosure and prevent expansion of fraudulent loan modification practices in LA's neighborhoods
LOS ANGELES – Mayor Antonio Villaraigosa today joined City Council President Eric Garcetti to announce a path breaking city ordinance to increase protections for Angelenos against fraudulent mortgage loan modifications. This measure – the first of its kind in the United States – fills a critical gap in the regulation of mortgage consultants and grants rights to homeowners at risk of foreclosure.
Joining the Mayor and Councilmember Garcetti were City Attorney Rocky Delgadillo; Leora Freedman, Staff Attorney from the Consumer Law Project at Public Counsel; Holly Fujie, President of the Board of Governors of the State Bar of California; and representatives from local banks, non-profits and legal aid groups. Several homeowners who have fallen victim to loan modification scams were also in attendance to share their stories.
“It is high time that elected officials, non-profit organizations, and banks work together to shut the door on loan scams and foreclosure fraud once and for all,” Mayor Villaraigosa said. “The loan modification ordinance protects our homeowners, imposes harsher penalties on scam artists, and informs Angelenos of their rights as residents of this City. We must use every tool at our disposal to help residents keep a roof over their heads, keep money in their pockets, and stand on a steady foundation long into the future.”
The ordinance is a direct response to the dramatic increase in mortgage loan modification scams that has taken place since late 2008. The measure strengthens the protections available to local homeowners and addresses a significant loophole in state law.
Currently, state law regulates the activities of mortgage consultants only after a Notice of Default has been filed for a property. However, in the current crisis, crooked loan modification consultants have begun to target distressed borrowers even before the notice of default period. As a result, there has been a growing need to increase the consumer protections available to these borrowers and to discourage fraudulent activity.
"This is truly one of the worst parts of the foreclosure crisis – so-called 'consultants' who take advantage of homeowners who are already in a difficult, stressful financial situation," said City Council President Eric Garcetti. "This ordinance will help protect homeowners seeking help with modifying their mortgages, and gives them better recourse against consultants who are really nothing more than scam artists."
Key Provisions of the Ordinance
1. The ordinance makes it illegal for mortgage consultants to charge an up front fee for their services.
2. The ordinance requires a written contract.
3. Homeowners must be given the right to cancel the contract within a 7 day cancellation period.
4. The ordinance increases notification requirements. The right of cancellation must be written in the contract as well as a passage alerting the borrower to the fact that free loan modification services are available from HUD-approved housing counselors.
5. Mortgage consultants cannot take a lien on the personal property or the real estate of a borrower as a form of payment.
6. The ordinance provides for a private right of action that includes three times the amount of damages, attorneys’ fees and costs of litigation.
"The State Bar is doing all it can to support access to legal assistance for victims of the mortgage foreclosure crisis,” said Holly Fujie, President of the Board of Governors of the State Bar of California. “It is also acting together with federal, state and local law enforcement and regulatory agencies such as the Los Angeles District Attorney, the DRE, the FTC, the state AG and HUD to prevent unscrupulous attorneys from taking advantage of these victims."
"We commend the City of Los Angeles for taking this step to reign in predatory companies that seek to take advantage of homeowners desperate to save their homes," said Alan Fisher, executive director of the California Reinvestment Coalition. "With these restrictions on bad practices, and a private right of action for victimized homeowners, Los Angeles is providing some meaningful protections for its residents. At the same time, this highlights the need for the state legislature to pass stronger consumer protection bills than those currently under consideration."
“The Ordinance being voted on by the City Council today is designed to ensure that Los Angeles residents will not be exploited by the latest scammers,” said Leora Freedman. “These so-called ‘consultants’ promise the moon and they assert that their service is better than any free service, or that they have an "in" with the lenders. Honest help is available and it is free. The City's ordinance will ensure that our residents don't throw any more good money after bad.”
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