Lending Industry Attacks California Homeowner's Rights to Legal Representation

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California Governor Arnold Schwarzenegger told the legislature over the weekend that he would not sign AB 94, a law that would protect homeowners from mortgage modification companies, unless they included a clause that would prohibit attorneys from accepting retainers for performing legal services to prevent foreclosures.

California homeowners are the ones losing here ... This is just the banking lobby influencing our government once again.

The lending industry and loan servicing lobbyists have successfully pressured Governor Schwarzenegger to demand that language be included in SB 94 that would prohibit attorneys from accepting retainers for loan modification negotiations with their loan servicers. The language, if adopted, will prevent homeowners from seeking legal representation to save their home from foreclosure.

According to Martin Andelman, of mandelmanmatters on ml-implode.com, "California homeowners are the ones losing here ... This is just the banking lobby influencing our government once again." Andelman has been an outspoken advocate for homeowner rights and writes a column for The Mortgage Lender Implode-o-meter and the Niche Report magazine.

The language proposed is as follows, according to Andelman;

"5) Prohibits persons including attorneys, until January 1, 2013, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:

a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform."

The proposed language will effectively cut-off homeowners from legal representation, while banks and loan servicers have a battery of attorneys dictating policies that are in their interests and leaving homeowners to fend for themselves. Attorneys who legitimately represent their client's interests to gain long-term modifications invest months of work, countless hours and delaying tactics by the loan servicers who only respond to the threat of litigation.

Alan Jablonski, a Long Beach, CA based consumer rights attorney and author of ''Successfully Navigating the Mortgage Maze'' said, "the modifications that the loan servicers are offering homeowners, if they will even talk with them, are short term fixes that will leave the homeowners facing foreclosure at a later date."

The language may also affect homeowners who are seeking bankruptcy protection, since attorneys practicing in this area also work to keep homeowners in their properties. Most homeowners want to stay in their homes, even if they owe more than the home is worth.

J. Arthur Roberts, a bankruptcy attorney located in Newport Beach, CA stated, "this language is of great concern, many homeowners who contact our office are trying to save their homes and we don't know how this will affect our practice, homeowners need attorneys to look into violations of state and federal law, it depends upon how this law will be interpreted."

Jablonski continued, "attorneys will not be able to help homeowners, since much of the time, if the attorney doesn't receive a retainer they have no way to be paid for their servicers, violations of the law will go unchallenged and those who could have remained in their homes will have no recourse."

"No attorney can guarantee an outcome, it's in our code of ethics and would irresponsible, but the only thing this language will do is drive homeowners to disreputable loan modification companies who will violate the law regardless of its passage," Jablonski said.

In 2008, California passed new laws that required lenders to work with homeowners and many attorneys are using these and other laws to fight for solutions to the foreclosure epidemic in the state. Many believe the financial industry is attempting to remove any chance homeowners have of staying in their homes for the long-term.

Alan Jablonski can be contacted and will be available for appearances on short deadlines at 562.235.5709. Martin Andelman and J. Arthur Roberts are available for appearances and further comments.


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