Legal Question in Real Estate Law in California
Negotiating loan modifications, work outs between borrowers and lenders
If I am doing negotiations (loan modifications, work outs) between borrowers in foreclosure and their lenders, and following all of the relevant laws, is it considered a �scam� by the state? I charge for this service. The borrower and I have a written contract. I can document a high success rate. I refund the customer�s money if I am unable to get the lender to do a loan mod.
Obviously, a borrower could attempt to do this with their lender directly, but it would be like you trying to rebuild your car engine. You can probably do it, but do you want the aggravation and learning curve?
2 Answers from Attorneys
Re: Negotiating loan modifications, work outs between borrowers and lenders
You are treading in dangerous water. The State and Federal government are doing their best to put people like you out of business. Did you know that as of Monday, in the State of California, you are now going to have to register with the State Attorney General's office by July 1, 2009, or you will be breaking the law doing any loan modification activiy? To register, you have to post a $100,000 bond with the State. There is further legislation pending that will virtually make it impossible for anyone but an attorney to do loan modifications. Also, if you are working for people who are in foreclosure, you are prohibited by law from taking any advance fees unless you are an attorney, or one of a very few select classes of lenders? You must have a written contract, but if you are a real estate licensee, that contract must be approved by the Commissioner of the Department of Real Estate before you can even start any work for anyone. Again, even as a real estate licensee you are prohibited from taking money in advance.
Though you say you are "following all of the relevant law," I think you owe it to yourself to hire someone to advise you as to what the actual requirements are - it appears to me just off the cuff that you are already violating the Mortgage Foreclosure Consultant's Act which has been on the books for years now, and was amended last year to prohibit you from taking advanced fees, even if you offer to refund them. I'm not saying I agree with these laws - the State is trying to stamp out the bad guys, but in doing so, they appear to be trying to kill a fly with an atom bomb!
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Re: Negotiating loan modifications, work outs between borrowers and lenders
It is my understanding that you are not allowed to collect any funds until the loan modification has been completed.
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