Full question:
I have been in the mortgage industry for over 20 years. I specialize in Loss Mitigation. I have been assisting borrowers on getting a loan modification completed with their lender. I do this through my dba Mortgage Works Services, and have never had a loan turned down, and my fees are very fair. Although I understand there are a lot of scam artists out there I am not one of those and all my clients are on a referral base only. I do not advertise. Effective October 11, 2009 a new law was passed that there could no longer be a third party affiliate to assist borrowers that charge up front fees for their service. Doing a loan mod is very hard work. Not the completing of the documents but the status calls and working with these lenders who have no idea what the guidelines are, another words it the follow-up that is the pain, and in most cases they are taking up to 7-8 months to complete the mod. A lot can happen in 8 months and to do all this work and not get paid is just crazy. There is just no way I could continue to do this if that is the case. So I wondered if there was another way to assist them and still be paid up front. They do get a free consultation, and I wont even sign them if I feel there could be the slightest chance they would be turned down. Could there be a contract stating the fee is for consulting only. I would then help them to prepare the forms , explain to them there options, they would have submit the package and follow up. My part would be solely on consulting with them. Is this legal in CA and if so how would/should this agreement be worded. I don't want to break the law but I am still getting people who really do not care about this new law and want me to assist them because of what I was able to do for their friend or family. I don't think it would be fair of me not to have some type of agreement and yet sometimes I think that may be the way to go , but I need to protect myself as well.
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: California
Answer:
According to the real estate link below, rather than charging an advance fee, a real estate broker and homeowner may agree that the broker will perform a series of separate loan modification services and be compensated once each service has been performed. For example, a broker and homeowner may agree that the homeowner will pay a certain amount after the broker provides the homeowner with an initial consultation, another amount after the broker prepares and submits a loan modification package to the lender, and another amount after the broker has negotiated the loan modification with the homeowner’s lender. Alternatively, the broker and homeowner may agree that the broker will charge a certain hourly rate for services rendered, and that the broker will collect that hourly fee after performing an hour of work.
Other things a broker could do to help collect a fee includes prescreening the homeowner to assess his or her creditworthiness upfront, entering into a written loan modification agreement, and following up with the client to collect payment once the broker’s compensation is due.
The statute of frauds is a law that requires certain contracts to be in writing and signed to be enforceable. As an example, a real estate broker seeking to recover compensation for listing a property for sale must have a written agreement signed by the seller (Cal. Civ. Code § 1624). However, the statute of frauds does not cover an agreement to compensate a broker for providing loan modification services or mortgage broker services. Hence, if no advance fees are collected, a broker may sue to recover compensation for performing loan modification services absent any agreement in writing.
Even though a broker may pursue a claim for compensation absent a written loan modification agreement, it is highly recommended to get the agreement in writing and signed by the homeowner. A written loan modification agreement can explain each party’s rights and obligations to help avoid future litigation. Furthermore, if a broker chooses to sue for compensation, a written loan modification agreement can serve as evidence of the broker’s entitlement to compensation.
For further discussion, please see also:
http://www.californialisting.com/Loan_Modification_2009/page_2195741.html
http://www.law.yale.edu/documents/pdf/cbl/Mayer_Morrison_Piskorski_New_Proposal.pdf
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
