Loan modification scams are everywhere, particularly in California. Homeowners should be wary of any loan modification company that charges up-front fees. In San Diego, we know of residences that have been taken advantage of by loan modification companies that charge up-front fees but are unable to deliver. Some of the main reasons why these loan modification companies fail to modify the loan is that they do not have a proper understanding of the banks requirements, they do not have the right staff to handle all of their applicants, or they are simply scammers who they want to get easy money and take advantage of vulnerable people.
A qualified loan modification company must be in business for at least 2 years for you to consider using them. Ask about their staff, the time frame for a loan mod change, their successes and failures, and what criteria they are using to determine if they will accept you as a candidate. The California Department of Real Estate regulates loan modification companies, including those operating in San Diego, and requires them to register with the DRE if they charge up-front fees. Lawyers are exempt from this registration, but it’s a good idea to check them out as well. Getting your up-front fees back from an unscrupulous attorney can be difficult.
California has strict rules regarding charging up-front fees for loan modifications. This is an activity regulated by the Department of Real Estate. Many loan modification companies do not fully comply with the law, and hundreds of Resist and Forbearance Orders have shut down illegal operations.
Non-attorney “attorney-backed” or “attorney-based” loan modification companies are supposed to have either an in-house attorney or an outside attorney. In many cases, there is no such attorney at all, or the attorney is by name only receiving a fee for the use of their license. So be careful when choosing your loan mod company in California.
To find out if the loan modification company is licensed to charge up-front fees, go to: Approved Loan Modification Companies. This is the California DRE website for Advance Fee Agreements. Check with your loan modification company you are working with to see if they are operating as a DBE (“Doing Business As”) or if they hang their license under a registered broker. Your name may not specifically appear on this list, but they may be fully certified.
The California Department of Real Estate website states that:
California Civil Code Section 2945, which regulates “foreclosure consultants,” prohibits the charging of up-front fees to any person who falls within the definition of “foreclosure consultant” as well as a licensee of real estate, for loan modification services if a Notice of Default has been filed against your property. Attorneys licensed in California when rendering services in the course of their legal practice(s) are exempt from this prohibition. Most California attorneys provide retainer agreements, therefore they do not fall under CA Code Section 2945.
According to Civil Code Section 2945 “If a Notice of Default has not been filed against your property, a real estate broker may be permitted to help you work out a loan modification or negotiate a possible resolution of your problem with your lender or loan servicer and ask you to pay up front for their services. However, the broker must ask you to 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 fee in advance.”
You should not pay any upfront fees for loan modifications in San Diego, Orange County, or anywhere in California if there is not a signed retainer agreement with a California licensed attorney, or if you are not working with a broker. real estate that has an advance payment agreement with the Department or Real Estate.
Here is the current California list that includes loan mod violations as well as other violations:
Orders to desist and abstain