Consumer Alert - Advance Fees and Loan Modification Services

The following information in black is quoted directly from the California Department of Real Estate website. 

"If you are behind in your mortgage payments, you may be contacted by individuals or companies that will offer to help you work out a loan modification with your lender or provide other services to you in order to help you prevent a foreclosure on your home.

You must be very careful if you are asked to pay for any of these services in advance, whether in cash, check or by charging your credit card. First, California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a “foreclosure consultant”, as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property. If your lender has recorded a notice of default, do not pay an advance fee to a real estate licensee, or to any person or entity. California licensed lawyers when rendering services in the course of their legal practice(s) are exempt from this prohibition. There are non-profit agencies that can assist you without charging you a fee and real estate licensees who can represent you for a fee to be paid after they have completed their work."

"If a Notice of Default has not been recorded against your property, it may be permissible for a real estate broker to assist you in working out a loan modification or otherwise negotiate a possible resolution to your problem with your lender or loan servicer and ask you for payment in advance for their services. However, the broker must have you sign an agreement that tells you what services will be performed, when they will be performed and how much you must pay. The broker cannot have you sign an agreement until it has been submitted to the Department of Real Estate for review and the broker has received permission to use it and collect the advance fee." 

In December I counted about 40 Brokers with no opinion letters. If you are not signing a retainer agreement with an attorney make sure your loan broker shows you his non opinion letter from the California Department of Real Estate.

Note: Licensed real estate brokers who provide loan modification or similar services without collecting fees in advance are not required to receive the Department of Real Estate’s permission as long as their services are fully completed before you pay them."

Please Note the DRE is not approving or endorsing the agreements.  I suspect one of the reason why they are giving no action letters as opposed to approving the retainer agreements s is that some if not all DRE license holders are practicing law without a license.  Be careful about "Attorney Backed" loan modification marketing operations.  What that heck does "Attorney backed" mean?  Are you being represented by a lawyer and protected by mal practice insurance and the state bar or a you deal with an operation pushing the limits of the both the California Department of Real Estate and the State Bar. 

If you are not signing a retainer agreement with a State Bar of California licensed Lawyer or you are not working with Real Estate Broker who can give you the link to the Department or Real Estate manifesting their permission to collect advanced fees, you should not be paying fees in advance.  There are plenty of people willing to work with you in a legal manner.  It takes a bit of discipline and a high degree of professionalism to do things the right way.  Work with pros.    

See if you Qualify for Negotiations First Name* Last Name* Email* Phone* Please List One Property at a time State of Subject Property* Zip Code of subject Property* Purchase Price* Amt of senior Loan approx* Amt of junior Loan approx* Amt of third Loan approx Do you live in property* yes no About when did you take out 1st Loan When did you take out 2nd When did you take out 3rd When did you purchase property Did you move in when purchased Which loans are at leaset 60 days past due 1st 2nd Both Have you suffered a loss in income* -- Please select --yes no Are you still earning income* -- Please select --yes no What type of Modification are you seeking 1-5 year payment reduction Permanent Payment Reduction Principle and Payment Reduction Monthly Gross Income* Monthly Net Income Monthly Debt payments (do include payments detailed above* Monthly Housing Payments - including Taxes, Insurance, Hoa's,* Monthly living expenses not detailed above Is your current first loan interest only* Yes No Is your current second loan interest Only* Yes No Question / Comments Enter the code:    Please wait...