Two Bay Area men were convicted this week of foreclosure consultant fraud.
The men took money from homeowners seeking loan modifications.
Sounds innocent enough, until you recall that California law prohibits anyone, even an attorney, from taking money in advance to provide loan modification or foreclosure prevention .
California Civil Code Section 2944.7 reads
(a) 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
(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
(2) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
(3) Take any power of attorney from the borrower for any purpose.
(d) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
(e) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
The take away for borrowers is that anyone who asks for money up front to help prevent foreclosure or modify a loan is breaking the law.
The unfortunate effect of the law, designed to protect homeowners from those trying to exploit them, is that it also operated to make it very difficult for legitimate professionals to provide these service if they have to wait til the successful conclusion of the loan modification for payment.
You can find a free HUD certified foreclosure counselor at http://hud.gov or Foreclosure Help Hotline 408 794 1242.