Advance Fees Prohibited for Home Loan Modifications by New State Law

SACRAMENTO, Calif.--(Business Wire)--
On October 19, 2009, California Governor Arnold Schwarzenegger held a press
conference to highlight the signing of legislation that will prevent homeowners
from being negatively impacted by fraudulent mortgage practices. Real Estate
Commissioner Jeff Davi was one of the officials present to support these laws,
including Senate Bill 94, which became effective immediately. Under this new
California law, no person or firm offering residential loan modification
assistance can collect upfront fees from borrowers to perform these services.
For more information on Governor`s press conference visit
http://www.gov.ca.gov/speech/13658/.

"Given the widespread abuses involving the collection of advance fees in
connection with loan modifications, this bill was a necessity," stated Real
Estate Commissioner Jeff Davi. "This urgency measure will go a long way to
provide needed consumer protection to homeowners who have been negatively
impacted by the economic downturn and are facing possible foreclosure," said
Commissioner Davi.

The California Department of Real Estate is currently investigating over 1,300
loan modification complaints and, in just the past 12 months, has issued nearly
400 desist and refrain orders and accusations against individual respondents for
illegally collecting advance fees. Most of the cases involve a scammer who has
collected an advance fee in exchange for a promise that the homeowner will
receive a sustainable loan modification; yet once the fee was paid little or
nothing was done to get the borrower`s loan modified. A list of persons and
companies that the Department has taken action against can be found at
http://www.dre.ca.gov/cons_drs.asp.

Senate Bill 94 goes right to the heart of the fraud. The measure prohibits any
person, including real estate licensees and attorneys, from demanding, claiming,
charging, collecting or receiving an upfront fee from a borrower in connection
with a promise to modify the borrower`s residential loan or to do some other
form of mortgage loan forbearance. The advance fee prohibition for loan
modification and forbearance services applies to residential property containing
four or fewer dwelling units.

Furthermore, Senate Bill 94 applies to anyone in California performing loan
modification services as well as to those outside of California who offer these
services to California consumers. It also mandates any person performing loan
modification services for a fee to disclose to the borrower that similar
services are available from approved non-profit housing counselors 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 the local
HUD office or by visiting www.hud.gov.

Those individuals and entities not in compliance with the provisions of SB 94
should be reported to the Department of Real Estate. Generally, before an
individual or company may lawfully perform loan modification services they must
obtain a license from the Department of Real Estate or be licensed as an
attorney acting within the scope of his or her license. Consumers can get
information on how to file a complaint or may check the license status of a
company or individual by going to the Department`s web site at www.dre.ca.gov.

California Department of Real Estate
Tom Pool, 916-227-0772

Copyright Business Wire 2009