Better Home Relief

Financially distressed homeowners continue to fall prey to pervasive unlicensed loan modification and foreclosure rescue companies. In many cases, these unlicensed entities are nothing more than perpetrators of fraud, who promise timely and helpful modification services, collect monies up front, perform no valuable services, and simply pocket the monies paid in advance by the desperate homeowners. Despite claims to the contrary, these companies do not have affiliations with any government agency or any special relationship with your mortgage company. Nor do they, as they may imply, have the ability to obtain more lenient repayment terms than you may be able to obtain yourself by contacting your mortgage company directly.

Effective October 11th, 2009, it is illegal to collect any fees, regardless of the form, for negotiating or attempting to negotiate a loan modification for a residential mortgage. All services must be fully completed before any charges can be imposed. It is also illegal to divide advance fees or services into components for the purpose of avoiding this law.

Housing and Development approved housing counselors are exempt from this law. The California Foreclosure Consultant Act was enacted to safeguard the public against deceit and financial hardship, and to encourage fair dealing in the rendition of foreclosure consulting services. With certain limited exceptions, it is now illegal to operate as a foreclosure consultant in California without completing registration and bonding requirements. Foreclosure consulting companies must register with the Justice Department, and post a $100,000 bond with the secretary of state for a period of two years. If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond. Companies who fail to comply will be subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

The Act also affords consumers a 5 day rescission period to cancel contracts without penalty or obligation, and requires the companies to have a pre-printed cancellation notice, along with instructions for cancellation included with the contract. Contracts must also be in writing, and provided in the language requested by the homeowner. If your written contract does not inform you of your right to a refund or to cancel, you may demand your refund or cancel your contract at any time, without regard to these time limits. Despite the law’s protections, if you are not dealing with a reputable company, you may find it difficult to enforce your rights.