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Notary Law Update: Senate Bill 94

Description:

SB 94 prohibits any person (including a real estate licensee or California attorney) from offering or negotiating foreclosure rescue or loan modification services where an advance fee is charged before performing all services provided in the contract. The law also requires a written notification be included in the contract to inform homeowners that the services of these intermediaries are not required.

State: California

Effective: October 11, 2009

Signed: October 11, 2009

Chapter: 630

Affects: Amends Sections 10026, 10085, 10133.1, and 10177 of, adds Section 10147.6 to, and adds and repeals Sections 6106.3 and 10085.6 of, the Business and Professions Code; amends Section 2945.1 of, adds Section 2944.6 to, and adds and repeals Section 2944.7 of, the Civil Code, and amends Section 22161 of the Financial Code.

Changes:

1. Until January 1, 2013, prohibits any person, including a real estate licensee, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications or other forms of mortgage loan forbearance, for a fee or other compensation paid by a borrower, from demanding or receiving any pre-performance compensation, requiring any security, lien or wage assignment as collateral for final compensation or taking a power of attorney for any purpose from a borrower.
2. Provides that the above-mentioned provision does not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a nondelinquent loan.
3. Requires any person, including a real estate licensee, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications or other forms of mortgage loan forbearance, as specified, for a fee or other compensation paid by a borrower, to provide a specified 14-point bold type statement regarding loan modification fees.
4. Until January 1, 2013, makes a violation of the above-mentioned provisions a public offense punishable by a fine of up to $10,000, by imprisonment of up to one year, or both, and, if committed by a business entity, by a fine of up to $50,000.
5. Until January 1, 2013, makes it an action for the imposition of discipline against a California attorney to violate either of the above-mentioned provisions.
6. Specifies that a real estate licensee and a finance lender are excluded from the definition of a foreclosure consultant when acting under the authority of that persons license and would delete the Real Estate Commissioners authority to terminate the finance lenders exclusion.
7. Contains other provisions.

Analysis:

SB 94 makes the collection of an advance fee by any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications or other forms of mortgage loan forbearance, including a real estate licensee and California attorney, a crime punishable by a fine of up to $10,000 or imprisonment of up to one year for individuals, or both, and a fine of up to $50,000 for businesses.

The bill also requires the following notification be provided in a contract for loan modification services: “It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Non-profit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of non-profit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov.”

A violation of this provision also carries the same penalties as the previously-described provision.

*PDF version is available only to NNA Members.

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