Board passes first reading of ordinance to regulate mortgage modification consultants

The Board of Supervisors on Tuesday advanced an ordinance designed to regulate mortgage modification consultants who charge homeowners upfront fees to negotiate loan modifications. The ordinance passed on first reading under the board's consent practice.

Sponsor Supervisor Campos described the measure as closing a loophole that allows consultants to charge vulnerable homeowners hundreds or thousands of dollars for services that are available for free. "These are services that people end up paying hundreds, if not thousands of dollars for, and they get nothing in return," Campos said.

The ordinance requires consultants to provide a written contract before services are delivered and to describe concrete, tangible benefits they intend to provide. The legislation sets thresholds for those tangible benefits; a violation would give affected homeowners a private cause of action and could be classified as a misdemeanor under the ordinance. Campos and colleagues said the measure targets operators acting outside legitimate mortgage-relief services and protects monolingual and other vulnerable homeowners who were described as victims in local cases.

Supervisor Ellsburn (Ellsberg) supported the purpose of the bill but noted concerns from legitimate mortgage providers about a provision that ties fees to a contractual standard (including a cited example that would require at least a 20% reduction over five years). He said the ordinance contains exemptions for legitimate providers and noted the measure is aimed at bad actors.

The board adopted the ordinance in first reading; it will return for subsequent readings and any amendments before final adoption.