Attention Homeowners: Be Careful How To Go About Seeking Loan Modifications

Posted by on Aug 26, 2011 in Foreclosure & Bankruptcy | 0 comments

Loan modification scams are all too common.  If you are a homeowner, be very careful in selecting the right persons to help you and understand the basic California foreclosure and loan modification laws put in place to protect the rights of homeowners seeking loan modifications.  At JCH Law Firm, we have experience helping homeowners with foreclosure and mortgage issues in and out of bankruptcy.  Please read the following to understand what a loan modification company can and cannot do:   

CA Civil Code Section 2944.7(a)(1) provides as follows:

“Notwithstanding any other provision of law, it shall be unlawful for any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, to do any of the following: (1) Claim, demand, charge, collect, or receive any compensation until after the person has fully performed each and every service the person contracted to perform or represented that he or she would perform.”

This means a loan modification company is not entitiled to any fees of any type until and after work is fully performed.  Assume an individual goes to a loan modification group for a loan modification.  The loan modification company prepared documents, provided them to attorneys, and collected fees from the individual before the status of the loan modification attempts were finalized.  That, in and of itself, is a violation of California Law.

CA Civil Code Section 2945.4 is clear in that foreclosure consultants cannot collect fees until after services are fully peformed.  A foreclosure consultant pursuant to CA Civil Code Section 2945.1 includes any person who represents to save an owner’s home from foreclosure (Section 2945.1(a)(8)).  Thus, any assistance provided by a loan modification group to benefit an individual in loan modification efforts, no matter how limited in scope, would categorize loan modification organizations as foreclosure consultants.  Again, because foreclosure consultants may not receive or collect money until services are completed; it is a violation of  California law to do so.

Also, CA Civil Code Section 2944.6(a) provides as follows: “Notwithstanding any other provision of law, any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, shall provide the following to the borrower, as a separate statement, in not less than 14-point bold type, prior to entering into any fee agreement with the borrower:

It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov.”

 

 

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