However, they, like other lenders, have been increasing their output as more effort is made to increase system efficiency.

Recently, we saw a great result from Bank of America under the government program.

This particular homeowner had a fairly typical experience with for those that obtain a loan modification. Her offer came within just under four months. While this may seem like a long time, it’s probably a little faster than most.

Her patience was recently rewarded with a significant monthly savings. With an original payment of $2,700 and an interest rate at 8.99%, there was some fear of not being able to keep up even though she had not yet missed a payment.

As of this morning, she is now saving $804.57 per month on her new payment of $1,539.98. Like all Making Home Affordable modifications, she will have to make that payment for three months on a trial basis before the modification will become permanent.

We’re very happy for her and her family and hopeful that this significant savings gives them the right amount of financial relief in these turbulent times.

For the loan modification industry in the nation’s foreclosure hotbed that is California, it means a delay in knowing the fate of how third party companies can represent distressed homeowners.

Both AB 764 and SB 94 were drafted in response to problems with fraud in the industry, but only SB 94 recognizes the importance of legitimate third party companies while AB 764 threatens to kill the industry.

What makes AB 764 such bad policy?

AB 764 would abolish any fees prior to a loan modification being granted which opens up the distinct possibility that a company could spend 10 months working on a file and never receive compensation. That’s a hard way for anyone to stay in business and, simply out, the bill represents a certain death to third party loan modification assistance in the state.

In fact, many have already stated that they would simply close the doors if this bill is signed into law. What do you think that will do for the state of homeownership in California when help is no longer anywhere to be found?

The bill’s motivation is honorable, but it’s methods are akin to using nuclear weapons to clean up a termite problem.

The difference with SB 94

SB 94 still abolishes advance fee practices but it allows for homeowners to enter into a series of contracts that require payment only after each contract is fulfilled.

In doing so, homeowners legally have the right to see progress being made on their file before they owe anything for the service being performed. For the mitigation company, it means being able to accept fair compensation over the course of the work being done.

Basically, it recognizes a homeowner’s right to see a return for their investment but also acknowledges the importance of the work being done by the mitigation company.

Some companies have been conducting business in similar fashion to the methods outlined in SB 94 for months. It’s a fair system for both clients and businesses alike.

The Case for Third Party Mitigation Companies

While much is said about fraudulent practices pertaining to foreclosure assistance, too little is said about the positives. There are many legitimate, hard-working companies fairly representing clients and obtaining workout agreements with their lender.

What’s often left unsaid is that the servicing companies frequently look for ways to avoid granting a loan modification and will make things extremely difficult on homeowners who have no representation. A law group has a stronger position with the lender and often gets results that homeowners, through no fault of their own, aren’t capable of getting.

There is also the matter of expertise. When a lender is looking for any reason, no matter how small, to reject a loan modification, the smallest mistakes are magnified. A company that does this for clients day in and day out knows what the lender is looking for and presents the case accordingly.

When you consider a new foreclosure is being filed every 13 seconds and the problems are only mounting, third party representation plays a vital role to helping homeowners stave off foreclosure. Relying on government programs and counseling that has been largely ineffective would only lead to bigger problems not easily solved by a piece of legislation.

When the governor finally gets around to signing his pile of bills, let’s hope SB 94 is the choice.

Example of a Success Case with the Making Home Affordable Plan

The client started with a monthly payment of $2724.43 per month. After a successful negotiation with Countrywide/B of A, the homeowner’s monthly payment dropped to $1931.61, A SAVINGS OF $810.82. We say it all the time, but this is literally the difference between ultimately getting foreclosed on and keeping your home.

In a letter to servicing company CEOs from Treasury Secretary Henry Paulson, it is stated that “There appears to be substantial variation among servicers in performance and borrower experience, as well as inconsistent results in converting trial modification offers into actual trial modifications. We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share.”

The letter also states that the government will work with the servicers to establish better guidelines and a transparent reporting system that will detail each mortgage servicing company’s commitment to modifying the loans of its clients.

Freddie Mac, in its compliance role, will begin auditing select loan modification rejections to curtail inadvertent denials.  This will help as there have been times that we have received loan modification denials that didn’t make any sense and required us to go back and point out why the rejection was invalid.

More accountability from the major servicers will be a good thing and hopefully they will build on the positive steps made with the government’s program.