California Loan Modifications Companies May Be Facing Some Changes

California loan modifications are a special case. Not because of the process itself, but the high foreclosure rate and the amount of modification scam companies sprouting up across the state. Both problems are of special interest to lenders all across California.

Currently California has the highest foreclosure rate of any state in the country. Thanks to the economic recession, lack of open jobs, and a high population California has suffered one of the greatest housing market hits in years.

To many of the homeowners in the state, the risk of foreclosure is not new to 2009. Prices are higher in the sunshine state than any other state, and the economic troubles the entire country is currently facing have been going for over a year. Many of the people who own homes in California have been struggling for quite some time and the efforts made by the Bush Administration in November 2008 did little to help homeowners in any state.

The biggest issue with California loan modifications is not the high foreclosure rate and amount of people who need loan modifications -- it is the amount of fake companies all over the state that promise to help homeowners seek modifications from their lenders for a fee.

Under the Home Affordable Modification Program launched in March 2009, any homeowner who is having a hard time paying their mortgage and going through financial hardship is eligible for a loan modification. Any anyone who wants assistance getting that modification is able to get assistance from a free representative of the program. These representatives help fill out the application, write the hardship letter, and negotiate on terms with lenders.

However; the scam companies set up all over California charge an up-front fee for their "services." Usually the fee comes even before the consultation, and many place additional fees on later under false pretenses such as "trust deposits" or "application fees". Many homeowners across the country, not exclusively, have fallen prey to these companies in desperation to save their homes. And instead of saving money, they lose money.

While the FBI is investigating suspected companies country-wide, California Senators are trying to take it a step further.

A bill may be passed that will prohibit charging any sort of up-front fees for California loan modifications services. In addition, any modification company who charges fees for services must also present a letter to the homeowner that states the availability of free comparable options.

While this may be bad news for legitimate modification companies, it is great news for those seeking California loan modifications if it passes.

Emma Lanier, "Loan Modification Services", Home Loan Modifications 101