Many distressed homeowners have suffered from loan modification fraud.  In an effort to further protect California homeowners from predatory lending and loan modification fraud, CA Bill 764 by led by Pedro Nava of Santa Barbara introduced a new law only allowing individuals or loan modification companies to collect fees only after a mortgage loan modification is successfully obtained. Many lawmakers had warned distressed homeowners against paying advanced fees. Those loan modification fees can be in the thousands of dollars, and often times these companies or individuals will do little or no work after getting their fees. In his veto message of AB 764, Governor Schwarzenegger wrote, “I do not agree with the provision of this bill that will only allow fees to be collected if a mortgage loan modification is successful. This could adversely affect legitimate businesses that provide loan modification services.”

Jeff Morris of the Loan Modification Relief firm in California expressed approval in the Governor’s action. “Even though there is unfortunate fraud happening, it does not mean that you need to attack all loan modification companies.  Morris continued, “If loan modification companies were not allowed to charge fees up-front, there would be no more loan modifications, because the process can take 6 months for successful mortgage relief.  Who in their right mind would work for free for 6 months?”