By Ryan C. Wood
I have been telling clients for a couple of years now that you should not be paying any upfront fees for loan modification services. That means nothing, zero and zilch. It is illegal under California law. It still happens though. There are plenty of Housing and Urban Development (HUD) approved providers of loan modification services that help you for free and follow the laws. Ask your local bankruptcy attorney for a referral to one of these HUD approved companies.
In California a loan modification company must be registered with the state as well: “By July 1, 2009, any person or company who performs or promises or offers to perform the services of a foreclosure consultant must register with the Attorney General’s Office, post a $100,000 bond and receive a Certificate of Registration from the AG’s Office or go out of business. A foreclosure consultant is one who, for compensation, promises to stop or postpone a foreclosure sale, save a home from foreclosure, or do anything else set forth in Civil Code Section 2945.1.”
The horrible position of possibly losing a home and lack of integrity by loan modification companies is a dangerous combination. What did unscrupulous capitalizers do? They found ways to skirt California law and charge fees for other things like bogus forensic audits and pre-litigation education fees. We have many clients describe to our bankruptcy lawyers their horrible stories about getting ripped off for thousands of dollars.
Recently the Consumer Financial Protection Bureau sued a southern California attorney for multiple violations of the Consumer Financial Protection Act of 2010 (“CFPA”). Who is the Consumer Financial Protection Bureau? It is an independent agency of the United States charged with regulating the offering and provision of consumer financial products or services under Federal consumer financial laws pursuant to 12 U.S.C. Section 5491(a).
§5491. Establishment of the Bureau of Consumer Financial Protection; (a) Bureau established – There is established in the Federal Reserve System, an independent bureau to be known as the “Bureau of Consumer Financial Protection”, which shall regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. The Bureau shall be considered an Executive agency, as defined in section 105 of title 5. Except as otherwise provided expressly by law, all Federal laws dealing with public or Federal contracts, property, works, officers, employees, budgets, or funds, including the provisions of chapters 5 and 7 of title 5, shall apply to the exercise of the powers of the Bureau.
The CFPA was passed in response to the widespread fraud that helped lead to the mortgage meltdown. In this particular lawsuit the defendants allegedly violated Regulation O of the CFPA in how they marketed the sale of their mortgage assistance relief services. According to court documents from the United State District Court, Central District of California, Case No. CV12-06147, attorney Chance Edward Gordon, doing business under a number of other names, promised loan modifications in exchange for an advance fee. The complaint filed against Gordon goes on to describe in detail how $2,500 to $4,000 was paid in advance by homeowners for loan modification services with no meaningful assistance ever received in return. Hopefully we will see more of these lawsuits and speak to less people getting ripped off.