Advance Fees Prohibited for Home Loan Modifications

Mon, Nov 9, 2009

News

A new State Law will protect home owners from scam artists, who promise a loan modification in exchange for a large fee that must be paid in advance. The state is investigating more than 1300 complaints about fraudulent organizations that collect a fee then do little or nothing to get a loan modified.

The new law also requires those offering loan modification services to inform clients that the same service is available free from non-profit HUD approved Housing counselors. For a list of HUD approved Housing counselors click here.

Below is the complete press release about the new law:

“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.”

10 Comments For This Post

  1. ROXANNE ANDRADE Says:

    I WENT ONLINE & SAW “QUICKEN LOANS” WAS OFFERING A VERY GOOD RATE. I CALLED MR. RALPH LINSANGAN WOULD BECOME MY MORTGAGE BANKER. I EXPLAINED HOW DIFFICULT IT WAS TO FIND A LOAN CO. TO ACCEPT A MANUFACTURED HOME LOAN. HE TOLD ME “THAT WOULD NOT BE A PROBLEM”. I WAS ABLE TO CONTACT MY REALTOR W/THE NEWS. I FILLED THE APPLICATION & INCLUDED ALL MY INFORMATION,INCLUDING CREDIT HISTORY,BANK ACCOUNTS,401K,STOCK,ETC.& ON NOV.2,2009 I RECEIVED A PRE-APPROVAL LETTER. SUBSEQUENTLY,I TURNED DOWN THE MANUFACTURED HOME,DUE TO INSPECTION. I WAS ABLE TO FIND ANOTHER MANUFACTURED HOME. I IMMEDIATLY CALLED MR.LINSANGAN AND WAS ABLE TO MEET THE 90 DAY DEADLINE. I WENT TO FED-EX,RECEIVED/SENT MORE FAXES, ADDDED DOCUMENTATIONS,SIGNATURES,AUUTHORIZATIONS & CONDITIONS,SENDING ME BACK AND FORTH,TO THE POINT THAT THE MANAGER WITNESSED ALL THE STRESS I ENDURED. NOT ONLY DID IT AFFECT ME,BUT MY 86YR.OLD MOTHER WAS INVOLVED. MR.LINSANGAN WANTED ADDED CASH RESERVE INFO. HE ASKED THAT I SHOW HIM DOCUMENTATION FROM MY MOMS ACCOUNT,SINCE SHE GAVE ME THE DOWN PAYMENT(GIFT). SHE JUMPED HURDLES,JUST TO GET HER MONEY & A STATEMENT TO SHOW QUICKEN. ALL THE STRESS SHE EXPERIENCED MADE HER MENTALLY SICK. THERE WAS A TIME THAT MR. LINSANGAN WAS SENDING ME A FAX THAT TOTALED ALMOST 100 PAGES. I WENT CRAZY TRYING TO CONTACT HIM TO STOP. I CONTACTED OTHER EMPLOYEES, TELLING THEM TO FIND HIM BY THE FAX MACHINE. HE FINALLY REACHED ME PG.76. I ASKED HIM TO STOP, E-MAIL ME THE DOCUMENTATION W/ELECTRONIC SIGNATURES. I LITERALLY ALMOST HAD A BREAKDOWN. I WAS TOTALLY EXHAUSTED MENTALLY AND PHYSICALLY. IT LEFT ME FUNCTIONLESS,COULD’NT EAT,COULD’NT SLEEP & HAD TO TAKE MEDICATIONS,JUST TO CONTINUE. AFTER ALL THE FAXES,BETWEEN QUICKEN & ME,QUICKEN & MY REALTOR, MY REALTOR & ME,HE TELLS ME AT THE VERY LAST MINUTE BEFORE CLOSING, THAT THEY DON’T DO MANUFACTURED HOME LOANS. I NEED’NT TELL YOU WHAT SHOCK & HORROR IT WAS. I HAD SPENT MONTHS OF WASTED TIME, EFFORT, MONEY INTO THIS. I HAVE NO CHOICE, BUT TO TAKE OUT OF MY 401K,LEAVING ME W/LITTLE TO LIVE ON IN MY RETIREMENT YEARS. THE LIES,DECEIT,MIS-LEADING FALSE HOPE & UNSCRUPULOUS BUSINESS SHOULD BE DEALT WITH. THEY HAVE NO COMPASSION OR REMORSE. I WOULD APPRECIATE ANY CONCERN YOU CAN GIVE ME. I CAN SUPPLY YOUW/ALL DOCUMENTATION & RECEIPTS. THANK YOU.

  2. becca Says:

    If you believe Quicken Loans was negligent in failing to advise you that
    it does not provide loans to finance the purchase of manufactured homes
    and that you suffered damages as a result, you may want to consider
    consulting with an attorney. Many local county and state bar
    associations provide referrals for attorneys whose practice is in the
    area of law your matter may involve. You may also want to contact the
    consumer unit of your county’s district attorney’s office to submit a
    complaint regarding this firm’s business practices.

    Duane Shewaga
    Paralegal
    Real Estate Fraud Unit
    Telephone: (408) 808-3787
    E-mail: dshewaga@da.sccgov.org

    Office of the District Attorney
    County of Santa Clara
    70 West Hedding St., West Wing
    San Jose, CA 95110

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