Tuesday, April 28, 2009

Garcetti Mortgage Modification Fraud ordinance passes Council

Jose Gomez (pictured at right) was concerned about falling into foreclosure on his home. He got approached by people -- including some in his grocery store parking lot -- who offered to help him reduce his mortgage payment for a fee.

Fortunately, Jose sought help from ONE LA, which helped him free of charge, but too many people like Jose are persuaded to pay hundreds or thousands of dollars to "consultants" who take an upfront payment and are never heard from again.

Today, the City Council passed an ordinance I authored to regulate "mortgage consultants" working with homeowners to reduce their payments before they fall into foreclosure. Previously, state law only regulated consultants working with homeowners who had already defaulted on their loans. Now, the City of Los Angeles will protect homeowners who are seeking help before they lose their homes.

Under the new law:

  • Consultants are required to provide a contract, which includes language notifying the homeowner that these services are also available free of charge through http://www.makinghomeaffordable.com/

  • Consultants are prohibited from charging an upfront fee

  • Homeowners may sue for treble damages (which gives private attorneys more incentive to represent homeowners in these cases)