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Recommendation to declare ordinance amending the Long Beach Municipal Code by adding Chapter 5.59 relating to the regulation of mortgage modification consultants, read and adopted as read. (Citywide)
DISCUSSION
At the City Council meeting on June 2, 2009, the City Council requested the City Attorney's Office to prepare an ordinance to increase protections for City residents against individuals engaged in fraudulent mortgage loan modification schemes. The proposed ordinance is a direct response to an increase in mortgage loan modification scams that have taken place since the recent economic downturn.
The proposed ordinance strengthens the protections available to local homeowners and addresses a significant loophole in state law. Currently, state law regulates the activities of mortgage consultants only after a Notice of Default has been filed against a property. The attached ordinance would regulate the activities of mortgage consultants before a Notice of Default is filed against the property, thereby closing a significant gap in consumer protection.
Key provisions of the ordinance include the following:
1. The ordinance makes it illegal for mortgage consultants to charge an up
front fee for their services;
2. The ordinance requires a written contract;
3. Homeowners must be given the right to cancel the contract within a 7-day
cancellation period;
4. The ordinance increases notification requirements. The right of cancellation
must be written in the contract as well as a passage alerting the borrower to
the fact that free loan modification services are available from HUD-approved
housing counselors;
5. Mortgage consultants cannot take a lien on the personal property or the real
estate of a borrower as a form of payment; and
6. The ordinance provides for a private right of action that includes three times
the amount of damages, attorneys' fees and costs of litigation if the
homeowner prevails in court.
The ordinance would not apply to the activities of certain licensed professionals such as a residential mortgage lender or servicer, attorneys, employees of banks, savings and loans, trust companies, credit unions, or a person acting under the express authority or written approval of the Department of Housing and Urban Development or other department or agency of the United States.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
Michael J. Mais
Assistant City Attorney
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Respectfully submitted, |
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ROBERT E. SHANNON, City Attorney |
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AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LONG BEACH AMENDING THE LONG BEACH MUNICIPAL CODE BY ADDING CHAPTER 5.59 RELATING TO THE REGULATION OF MORTGAGE MODIFICATION CONSULTANTS