The Los Angeles City Council finds that:
A. There is an unprecedented number of homeowners in the City of Los Angeles threatened with foreclosure;
B. At the same time, there is an unprecedented effort on the part of various governmental entities and lenders to encourage lenders and borrowers to attempt to modify mortgages in order to make such loans more affordable and to lessen, if not prevent, the possibility of foreclosure;
C. On March 4, 2009, the Obama Administration announced new U.S. Department of the Treasury guidelines to enable loan servicers to begin modifications of eligible mortgages under the Administration’s Homeowner Affordability and Stability Plan;
D. There has arisen a class of people who, preying on homeowners threatened with foreclosure, falsely promise to attempt to modify mortgages in exchange for advance payment and who provide no written contract for their services, thus thwarting homeowners’ attempts to sue for breach of contract when fraud becomes apparent;
E. California state law currently regulates the activities of people who offer to arrange for services purporting, among other things, to cure mortgage defaults after a property is in foreclosure as evidenced by the recording of a Notice of Default pursuant to California Civil Code Section 2924, but there exists no state regulation of such people who offer or provide such services prior to the recording of a Notice of Default; and
F. It is in the public interest that the activities of people who promise to attempt to prevent foreclosure prior to the recording of a Notice of Default be regulated. Furthermore, in order to protect homeowners from the actions of unscrupulous people who falsely promise to attempt to prevent foreclosure, remedies must be provided where unlawful activity has occurred.
G. This crisis is only expected to worsen in the upcoming months as many adjustable rate mortgages are scheduled to be reset to higher interest rates prompting a series of new foreclosures in the City of Los Angeles while, at the same time, there are unprecedented and well-publicized efforts to encourage homeowners to attempt to modify their mortgages to affordable levels.
H. The City Council enacts this Article as an urgency ordinance pursuant to Charter Section 253 to prevent the victimization of people who want to modify the terms of their existing mortgages in order to make their homes more affordable and reduce the likelihood of going into default and, thus, preserve public peace, health and safety.