Although this is not new, it’s the subject of stubborn misunderstanding in society.  This post should be read in conjunction with a related post entitled “Foreclosure Consultants – No Advance Fees, Mandatory Disclosures” posted here.

CALIFORNIA LAW – Effective October 11, 2009, California enacted strict laws requiring disclosures and limiting charges for mortgage modifications. Here is a summary of the law:

Statement of Rights and List of No Cost Options – California Civil Code Section 2944.6(a) provides that any person who offers to negotiate, arrange or perform a mortgage loan modification or forbearance in exchange for a fee paid by the borrower, shall provide the borrower, prior to entering into a fee agreement, a separate statement advising the borrower of various points including the fact that it is not necessary to pay a third party to arrange for a modification or forbearance and that the United States Department of Housing and Urban Development provides a list of non-profit organizations that provide assistance to borrowers at no cost

Prohibition on Advance Fees – California Civil Code Section 2944.7(a)(1) provides that it shall be unlawful for any person who offers to negotiate, arrange or perform a mortgage loan modification or forbearance in exchange for a fee paid by the borrower, to 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.

FEDERAL LAW – Effective January 31, 2011, 16 Code of Federal Regulations Part 322 (lawyers exempt) prohibits the charging of any fee until the consumer accepts a mortgage modification offer from his/her mortgage lender. This law also requires a mortgage relief provider to notify consumers in writing of many things including:

1. no cost options including governmental and non-profit assistance

2. right to decline any offer from the consumers lender with no money due for modification services

3. affiliation or lack thereof with any governmental or non-profit agency

4. Likelihood of success

At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation.  We have offices in Walnut Creek, Antioch, and Hercules.