Mortgage Foreclosure Consultants - Mortgage - CA Civil Law

Section § 2945

This law focuses on protecting homeowners facing foreclosure from being taken advantage of by foreclosure consultants. It highlights how these consultants often promise help but charge high fees for little to no service, potentially leading homeowners to lose their homes. The law requires any agreement with foreclosure consultants to be in writing and ensures homeowners can cancel these contracts. Overall, it aims to guard against deceit, prevent financial hardship, and promote fair treatment. The legislature declares this necessary due to the significant economic impact and the welfare of citizens while ensuring the law is interpreted broadly to fulfill these goals.

(a) The Legislature finds and declares that homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded pursuant to Section 2924 until the time surplus funds from any foreclosure sale are distributed to the homeowner or his or her successor. Foreclosure consultants represent that they can assist homeowners who have defaulted on obligations secured by their residences. These foreclosure consultants, however, often charge high fees, the payment of which is often secured by a deed of trust on the residence to be saved, and perform no service or essentially a worthless service. Homeowners, relying on the foreclosure consultants’ promises of help, take no other action, are diverted from lawful businesses which could render beneficial services, and often lose their homes, sometimes to the foreclosure consultants who purchase homes at a fraction of their value before the sale. Vulnerable homeowners are increasingly relying on the services of foreclosure consultants who advise the homeowner that the foreclosure consultant can obtain the remaining funds from the foreclosure sale if the homeowner executes an assignment of the surplus, a deed, or a power of attorney in favor of the foreclosure consultant. This results in the homeowner paying an exorbitant fee for a service when the homeowner could have obtained the remaining funds from the trustee’s sale from the trustee directly for minimal cost if the homeowner had consulted legal counsel or had sufficient time to receive notices from the trustee pursuant to Section 2924j regarding how and where to make a claim for excess proceeds.

(b) The Legislature further finds and declares that foreclosure consultants have a significant impact on the economy of this state and on the welfare of its citizens.

(1) To require that foreclosure consultant service agreements be expressed in writing; to safeguard the public against deceit and financial hardship; to permit rescission of foreclosure consultation contracts; to prohibit representations that tend to mislead; and to encourage fair dealing in the rendition of foreclosure services.

(2) The provisions of this article shall be liberally construed to effectuate this intent and to achieve these purposes.

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(Amended by Stats. 2004, Ch. 177, Sec. 6. Effective January 1, 2005.)

Section § 2945.1

This law defines what a "foreclosure consultant" is and outlines the services that make someone fall under this category. It includes anyone who, for a fee, offers services such as stopping a foreclosure sale, obtaining forbearance, or helping with financial arrangements linked to a foreclosure. However, the law excludes certain professionals, like licensed attorneys or financial institutions, when acting within their professional capacity. It also clarifies terms like "service," which includes financial advice or arranging payment extensions, and "residence in foreclosure." In essence, it sets the parameters for identifying foreclosure consultants and the activities that define their role, while exempting specific professionals from this definition.

The following definitions apply to this chapter:

(a) “Foreclosure consultant” means any person who makes any solicitation, representation, or offer to any owner to perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner do any of the following:

(1) Stop or postpone the foreclosure sale.

(2) Obtain any forbearance from any beneficiary or mortgagee.

(3) Assist the owner to exercise the right of reinstatement provided in Section 2924c.

(4) Obtain any extension of the period within which the owner may reinstate his or her obligation.

(5) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a deed of trust or mortgage on a residence in foreclosure or contained that deed of trust or mortgage.

(6) Assist the owner to obtain a loan or advance of funds.

(7) Avoid or ameliorate the impairment of the owner’s credit resulting from the recording of a notice of default or the conduct of a foreclosure sale.

(8) Save the owner’s residence from foreclosure.

(9) Assist the owner in obtaining from the beneficiary, mortgagee, trustee under a power of sale, or counsel for the beneficiary, mortgagee, or trustee, the remaining proceeds from the foreclosure sale of the owner’s residence.

(b) A foreclosure consultant does not include any of the following:

(1) A person licensed to practice law in this state when the person renders service in the course of his or her practice as an attorney at law.

(2) A person licensed under Division 3 (commencing with Section 12000) of the Financial Code when the person is acting as a prorater as defined therein.

(3) A person licensed under Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code when the person is acting under the authority of that license, as described in Section 10131 or 10131.1 of the Business and Professions Code.

(4) A person licensed under Chapter 1 (commencing with Section 5000) of Division 3 of the Business and Professions Code when the person is acting in any capacity for which the person is licensed under those provisions.

(5) A person or his or her authorized agent acting under the express authority or written approval of the Department of Housing and Urban Development or other department or agency of the United States or this state to provide services.

(6) A person who holds or is owed an obligation secured by a lien on any residence in foreclosure when the person performs services in connection with this obligation or lien.

(7) Any person licensed to make loans pursuant to Division 9 (commencing with Section 22000) of the Financial Code when the person is acting under the authority of that license.

(8) Any person or entity doing business under any law of this state, or of the United States relating to banks, trust companies, savings and loan associations, industrial loan companies, pension trusts, credit unions, insurance companies, or any person or entity authorized under the laws of this state to conduct a title or escrow business, or a mortgagee which is a United States Department of Housing and Urban Development approved mortgagee and any subsidiary or affiliate of the above, and any agent or employee of the above while engaged in the business of these persons or entities.

(9) A person licensed as a residential mortgage lender or servicer pursuant to Division 20 (commencing with Section 50000) of the Financial Code, when acting under the authority of that license.

(c) Notwithstanding subdivision (b), any person who provides services pursuant to paragraph (9) of subdivision (a) is a foreclosure consultant unless he or she is the owner’s attorney.

(d) “Person” means any individual, partnership, corporation, limited liability company, association or other group, however organized.

(e) “Service” means and includes, but is not limited to, any of the following:

(1) Debt, budget, or financial counseling of any type.

(2) Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a lien on a residence in foreclosure.

(3) Contacting creditors on behalf of an owner of a residence in foreclosure.

(4) Arranging or attempting to arrange for an extension of the period within which the owner of a residence in foreclosure may cure his or her default and reinstate his or her obligation pursuant to Section 2924c.

(5) Arranging or attempting to arrange for any delay or postponement of the time of sale of the residence in foreclosure.

(6) Advising the filing of any document or assisting in any manner in the preparation of any document for filing with any bankruptcy court.

(7) Giving any advice, explanation, or instruction to an owner of a residence in foreclosure which in any manner relates to the cure of a default in or the reinstatement of an obligation secured by a lien on the residence in foreclosure, the full satisfaction of that obligation, or the postponement or avoidance of a sale of a residence in foreclosure pursuant to a power of sale contained in any deed of trust.

(8) Arranging or attempting to arrange for the payment by the beneficiary, mortgagee, trustee under a power of sale, or counsel for the beneficiary, mortgagee, or trustee, of the remaining proceeds to which the owner is entitled from a foreclosure sale of the owner’s residence in foreclosure. Arranging or attempting to arrange for the payment shall include any arrangement where the owner transfers or assigns the right to the remaining proceeds of a foreclosure sale to the foreclosure consultant or any person designated by the foreclosure consultant, whether that transfer is effected by agreement, assignment, deed, power of attorney, or assignment of claim.

(9) Arranging or attempting to arrange an audit of any obligation secured by a lien on a residence in foreclosure.

(f) “Residence in foreclosure” means a residence in foreclosure as defined in Section 1695.1.

(g) “Owner” means a property owner as defined in Section 1695.1.

(h) “Contract” means any agreement, or any term thereof, between a foreclosure consultant and an owner for the rendition of any service as defined in subdivision (e).

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(Amended by Stats. 2010, Ch. 596, Sec. 1. (AB 2325) Effective January 1, 2011.)

Section § 2945.10

This law says that if a contract with a foreclosure consultant tries to limit the consultant's legal responsibility, it doesn't hold up legally and can make the whole contract invalid if the homeowner chooses. The foreclosure consultant must pay for any harm caused by this. Contracts also can't force arbitration for disputes unless there are specific legal reasons to cancel any contract. These rules apply to contracts made after January 1, 1991.

(a) Any provision in a contract which attempts or purports to limit the liability of the foreclosure consultant under Section 2945.9 shall be void and shall at the option of the owner render the contract void. The foreclosure consultant shall be liable to the owner for all damages proximately caused by that provision. Any provision in a contract which attempts or purports to require arbitration of any dispute arising under this chapter shall be void at the option of the owner only upon grounds as exist for the revocation of any contract.

(b) This section shall apply to any contract entered into on or after January 1, 1991.

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(Added by Stats. 1990, Ch. 1537, Sec. 5.)

Section § 2945.11

If someone is working as an agent or employee for a foreclosure consultant in California, they must show the property owner proof of a valid real estate sales license and be bonded by an insurer for twice the property's value. They also need to provide a written statement confirming these details before any property interest is transferred. If they don't do this, the owner can cancel the contract, and the consultant may have to pay for any resulting damages.

(a) Any representative, as defined in subdivision (b) of Section 2945.9, deemed to be the agent or employee or both the agent and the employee of the foreclosure consultant shall be required to provide both of the following:

(1) Written proof to the owner that the representative has a valid current California Real Estate Sales License and that the representative is bonded by an admitted surety insurer in an amount equal to at least twice the fair market value of the real property that is the subject of the contract.

(2) A statement in writing, under penalty of perjury, that the representative has a valid current California Real Estate Sales License, that the representative is bonded by an admitted surety insurer in an amount equal to at least twice the value of the real property that is the subject of the contract and has complied with paragraph (1). The written statement required by this paragraph shall be provided to all parties to the contract prior to the transfer of any interest in the real property that is the subject of the contract.

(b) The failure to comply with subdivision (a) shall, at the option of the owner, render the contract void and the foreclosure consultant shall be liable to the owner for all damages proximately caused by the failure to comply.

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(Amended by Stats. 1996, Ch. 124, Sec. 8. Effective January 1, 1997.)

Section § 2945.2

This law gives property owners the right to cancel a contract with a foreclosure consultant within five business days of signing. To cancel, owners need to send a written notice to the consultant via mail, fax, or email, using the details provided in the contract. The cancellation is effective when the notice is mailed with prepaid postage or successfully faxed or emailed. Importantly, the notice doesn’t have to follow a specific format as long as it clearly shows the owner’s intent to cancel.

(a) In addition to any other right under law to rescind a contract, an owner has the right to cancel such a contract until midnight of the fifth business day, as defined in subdivision (e) of Section 1689.5, after the day on which the owner signs a contract that complies with Section 2945.3.

(b) Cancellation occurs when the owner gives written notice of cancellation to the foreclosure consultant by mail at the address specified in the contract, or by facsimile or electronic mail at the number or address identified in the contract.

(c) Notice of cancellation, if given by mail, is effective when deposited in the mail properly addressed with postage prepaid. If given by facsimile or electronic mail, notice of cancellation is effective when successfully transmitted.

(d) Notice of cancellation given by the owner need not take the particular form as provided with the contract and, however expressed, is effective if it indicates the intention of the owner not to be bound by the contract.

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(Amended by Stats. 2008, Ch. 278, Sec. 2. Effective January 1, 2009. Operative July 1, 2009, by Sec. 7 of Ch. 278.)

Section § 2945.3

This section ensures that any contract between a foreclosure consultant and a homeowner is clear and fair. The contract must be written, fully disclose the services, compensation, and include specific notices. Importantly, it must state that the consultant cannot charge fees before services are completed or ask the owner to sign certain legal documents like deeds. Contracts must be in the primary language used for communication, with a notice about the right to translations if needed, and highlight cancellation rights close to the signature line. Owners have five days to cancel the agreement without penalty, and the ability to do this should be made clear through an attached cancellation notice. Foreclosure consultants must provide copies of the contract and ensure the owner knows their rights to cancel.

(a) Every contract shall be in writing and shall fully disclose the exact nature of the foreclosure consultant’s services and the total amount and terms of compensation.

(b) The following notice, printed in at least 14-point boldface type and completed with the name of the foreclosure consultant, shall be printed immediately above the statement required by subdivision (d):

“NOTICE REQUIRED BY CALIFORNIA LAW

or anyone working
(Name)
for him or her CANNOT:

(1) Take any money from you or ask you for money

untilhas
(Name)

completely finished doing everything he or she said he or she would do; and

(2) Ask you to sign or have you sign any lien, deed of trust, or deed.”

(c) The contract shall be written in the same language as principally used by the foreclosure consultant to describe his or her services or to negotiate the contract. In addition, the foreclosure consultant shall provide the owner, before the owner signs the contract, with a copy of a completed contract written in any other language used in any communication between the foreclosure consultant and the owner and in any language described in subdivision (b) of Section 1632 and requested by the owner. If English is the language principally used by the foreclosure consultant to describe the foreclosure consultant’s services or to negotiate the contract, the foreclosure consultant shall notify the owner orally and in writing before the owner signs the contract that the owner has the right to ask for a completed copy of the contract in a language described in subdivision (b) of Section 1632.

(d) The contract shall be dated and signed by the owner and shall contain in immediate proximity to the space reserved for the owner’s signature a conspicuous statement in a size equal to at least 10-point boldface type, as follows: “You, the owner, may cancel this transaction at any time prior to midnight of the fifth business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.”

(e) The contract shall contain on the first page, in a type size no smaller than that generally used in the body of the document, each of the following:

(1) The name, mailing address, electronic mail address, and facsimile number of the foreclosure consultant to which the notice of cancellation is to be mailed.

(2) The date the owner signed the contract.

(f) The contract shall be accompanied by a completed form in duplicate, captioned “notice of cancellation,” which shall be attached to the contract, shall be easily detachable, and shall contain in type of at least 10-point the following statement written in the same language as used in the contract:

“NOTICE OF CANCELLATION

(Enter date of transaction) (Date)

You may cancel this transaction, without any penalty or

obligation, within five business days from the above date.

To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegram,

(Name of foreclosure consultant)

(Address of foreclosure consultant’s place of business)

You may also cancel by sending a facsimile (fax) of a signed and dated copy of this cancellation notice, or any other written notice, to the following number:

(Facsimile telephone number of foreclosure consultant’s place of business)

You may also cancel by sending an e-mail canceling this transaction to the following e-mail address:

(E-mail address of foreclosure consultant’s business)

I hereby cancel this transaction

(Date)

”

(Owner’s signature)

(g) The foreclosure consultant shall provide the owner with a copy of the contract and the attached notice of cancellation.

(h) Until the foreclosure consultant has complied with this section, the owner may cancel the contract.

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(Amended by Stats. 2008, Ch. 278, Sec. 3. Effective January 1, 2009. Operative July 1, 2009, by Sec. 7 of Ch. 278.)

Section § 2945.4

This section outlines rules for foreclosure consultants. They can't charge fees until they've completed their services, nor can they charge over 10% interest on any loans. They also can't use property as collateral for payments, take a power of attorney, or conceal payments from third parties. Consultants must disclose all interests and cannot gain ownership of foreclosed homes they're working on. Additionally, they must ensure all contracts meet certain legal requirements and avoid any agreements related to surplus funds after a foreclosure sale.

It shall be a violation for a foreclosure consultant to:

(a) Claim, demand, charge, collect, or receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that he or she would perform.

(b) Claim, demand, charge, collect, or receive any fee, interest, or any other compensation for any reason which exceeds 10 percent per annum of the amount of any loan which the foreclosure consultant may make to the owner.

(c) Take any wage assignment, any lien of any type on real or personal property, or other security to secure the payment of compensation. That security shall be void and unenforceable.

(d) Receive any consideration from any third party in connection with services rendered to an owner unless that consideration is fully disclosed to the owner.

(e) Acquire any interest in a residence in foreclosure from an owner with whom the foreclosure consultant has contracted. Any interest acquired in violation of this subdivision shall be voidable, provided that nothing herein shall affect or defeat the title of a bona fide purchaser or encumbrancer for value and without notice of a violation of this article. Knowledge that the property was “residential real property in foreclosure,” does not constitute notice of a violation of this article. This subdivision may not be deemed to abrogate any duty of inquiry which exists as to rights or interests of persons in possession of residential real property in foreclosure.

(f) Take any power of attorney from an owner for any purpose.

(g) Induce or attempt to induce any owner to enter into a contract which does not comply in all respects with Sections 2945.2 and 2945.3.

(h) Enter into an agreement at any time to assist the owner in arranging, or arrange for the owner, the release of surplus funds after the trustee’s sale is conducted, whether the agreement involves direct payment, assignment, deed, power of attorney, assignment of claim from an owner to the foreclosure consultant or any person designated by the foreclosure consultant, or any other compensation.

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(Amended by Stats. 2008, Ch. 278, Sec. 4. Effective January 1, 2009. Operative July 1, 2009, by Sec. 7 of Ch. 278.)

Section § 2945.45

This law is about regulating foreclosure consultants. Before acting as a foreclosure consultant, a person must register with the Department of Justice, submit detailed information, and maintain a $100,000 surety bond. The registration involves disclosing personal and business details and advertising materials. The Foreclosure Consultant Regulation Fund is established to handle the registration fees. The Department of Justice can refuse or revoke registration if there's any dishonesty or legal violations. Violating these rules can lead to significant fines and possibly jail time.

(a) Except as provided in subdivision (b) of Section 2945.1, a person shall not take any action specified in subdivision (a) of Section 2945.1 unless the person satisfies the following requirements:

(1) The person registers with, and is issued and maintains a certificate of registration from, the Department of Justice in accordance with the following requirements:

(A) The person shall submit a completed registration form, along with applicable fees, to the department. The registration form shall include the name, address, and telephone number of the foreclosure consultant, all of the names, addresses, telephone numbers, Internet Web sites, and e-mail addresses used or proposed to be used in connection with acting as a foreclosure consultant, a statement that the person has not been convicted of, or pled nolo contendere to, any crime involving fraud, misrepresentation, dishonesty, or a violation of this article, a statement that the person has not been liable under any civil judgment for fraud, misrepresentation, or violations of this article or of Section 17200 or 17500 of the Business and Professions Code, and any additional information required by the department.

(B) The registration form shall be accompanied by a copy of all print or electronic advertising and other promotional material, and scripts of all telephonic or broadcast advertising and other statements used or proposed to be used in connection with acting as a foreclosure consultant.

(D) The person shall file an update of any material change in the information required by subparagraphs (A) and (B) with the department.

(E) The person shall pay any fee set by the department to defray reasonable costs incurred in connection with the department’s responsibilities under this article.

(2) The person obtains and maintains in force a surety bond in the amount of one hundred thousand dollars ($100,000). The bond shall be executed by a corporate surety admitted to do business in this state. The bond shall be made in favor of the State of California for the benefit of homeowners for damages caused by the foreclosure consultant’s violation of this article or any other provision of law. A copy of the bond shall be filed with the Secretary of State, with a copy provided to the department pursuant to subparagraph (C) of paragraph (1).

(b) The Foreclosure Consultant Regulation Fund is hereby created in the State Treasury for the deposit of fees submitted to the Department of Justice pursuant to subparagraph (A) of paragraph (1) of subdivision (a) for registration as a foreclosure consultant. Moneys in the fund shall be available, upon appropriation by the Legislature, for the costs of the department incurred in connection with the administration of the registration program.

(c) The Department of Justice may refuse to issue, or may revoke, a certificate of registration because of any misstatement in the registration form, because the foreclosure consultant has been held liable for the violation of any law described in subparagraph (A) of paragraph (1) of subdivision (a), because the foreclosure consultant has failed to maintain the bond required under paragraph (2) of subdivision (a), or because of any violation of this chapter.

(d) A person who violates subdivision (a) shall be punished, for each violation, by a fine of not less than one thousand dollars ($1,000) and not more than twenty-five thousand dollars ($25,000), by imprisonment in the county jail for not more than one year, or by both that fine and imprisonment. The imposition of a penalty pursuant to this subdivision shall not be affected by the availability of any other relief, remedy, or penalty provided by law, and shall not affect the availability of any such relief, remedy, or penalty.

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(Added by Stats. 2008, Ch. 278, Sec. 5. Effective January 1, 2009. Operative July 1, 2009, by Sec. 7 of Ch. 278.)

Section § 2945.5

If a homeowner tries to give up their rights under this article, that attempt is worthless and doesn't count because it's against public policy. Also, if a foreclosure consultant tries to persuade a homeowner to do this, it's considered breaking the rules of this article.

Any waiver by an owner of the provisions of this article shall be deemed void and unenforceable as contrary to public policy. Any attempt by a foreclosure consultant to induce an owner to waive his rights shall be deemed a violation of this article.

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(Amended by Stats. 1980, Ch. 676, Sec. 53.)

Section § 2945.6

If a foreclosure consultant violates certain rules, the homeowner can sue them. The homeowner can get compensation for actual damages, plus the court could make the consultant pay extra damages, at least three times the fees they received or the homeowner's actual losses. These rights are in addition to any other legal actions the homeowner might take, but the lawsuit must be filed within four years of the violation.

(a) An owner may bring an action against a foreclosure consultant for any violation of this chapter. Judgment shall be entered for actual damages, reasonable attorneys’ fees and costs, and appropriate equitable relief. The court also may, in its discretion, award exemplary damages and shall award exemplary damages equivalent to at least three times the compensation received by the foreclosure consultant in violation of subdivision (a), (b), or (d) of Section 2945.4, and three times the owner’s actual damages for any violation of subdivision (c), (e), or (g) of Section 2945.4, in addition to any other award of actual or exemplary damages.

(b) The rights and remedies provided in subdivision (a) are cumulative to, and not a limitation of, any other rights and remedies provided by law. Any action brought pursuant to this section shall be commenced within four years from the date of the alleged violation.

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(Amended by Stats. 1997, Ch. 50, Sec. 5. Effective January 1, 1998.)

Section § 2945.7

If someone breaks the rules mentioned in Section 2945.4, they can face a fine up to $10,000, up to a year in county jail, or both. This punishment can be in addition to any other legal consequences.

Any person who commits any violation described in Section 2945.4 shall be punished by a fine of not more than ten thousand dollars ($10,000), by imprisonment in the county jail for not more than one year, or pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment for each violation. These penalties are cumulative to any other remedies or penalties provided by law.

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(Amended by Stats. 2011, Ch. 15, Sec. 35. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)

Section § 2945.8

This law says that if any part of this article is found to be unconstitutional, it won't affect the rest of the article. The rest of the article will still apply to other people and situations.

If any provision of this article or the application thereof to any person or circumstance is held to be unconstitutional, the remainder of the article and the application of such provision to other persons and circumstances shall not be affected thereby.

unconstitutional provision application persons circumstance remainder effect validity severability constitutional challenge

(Added by Stats. 1979, Ch. 1029.)

Section § 2945.9

If a foreclosure consultant or their representative makes a statement or act that causes harm related to foreclosure services, the consultant is responsible for any damages. This includes when the representative convinces a homeowner to hire the consultant, pay them, or transfer home ownership during foreclosure.

(a) A foreclosure consultant is liable for all damages resulting from any statement made or act committed by the foreclosure consultant’s representative in any manner connected with the foreclosure consultant’s (1) performance, offer to perform, or contract to perform any of the services described in subdivision (a) of Section 2945.1, (2) receipt of any consideration or property from or on behalf of an owner, or (3) performance of any act prohibited by this article.

(b) “Representative” for the purposes of this section means a person who in any manner solicits, induces, or causes (1) any owner to contract with a foreclosure consultant, (2) any owner to pay any consideration or transfer title to the residence in foreclosure to the foreclosure consultant, or (3) any member of the owner’s family or household to induce or cause any owner to pay any consideration or transfer title to the residence in foreclosure to the foreclosure consultant.

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(Amended by Stats. 2006, Ch. 538, Sec. 55. Effective January 1, 2007.)

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