July 11, 2009

Cal Foreclosure Consultants Must Now Register & Post $100K Bond

As the mortgage crises began, I received a number of unsolicited inquiries from people who were interested in starting a business to help borrowers in distress by purchasing and leasing back their residence or negotiating a loan modification. I explained to these callers that they would be acting as "foreclosure consultants" and would be subject to statutes in the Civil Code that regulate foreclosure consultants. Invariably, the callers were not aware of these statutes and were not interested in paying a lawyer to advise them how to follow the law. Apparently budding foreclosure consultants fancy the idea of a new business with no start up costs.

As the mortgage crises became worse, there stories in the news about unscrupulous people who would take a fee up-front to negotiate a loan modification (this is illegal unless an exemption applies) and then do nothing for the fee. The California Legislature was apparently moved by these stories to amend Civil Code sections 2945, et seq. effective July 1, 2009 so that "foreclosure consultants" are now require to register with the State and post a $100,000 bond. To learn more about the changes to the laws governing "foreclosure consultants," and the consequences if the laws are violated, click here or here.

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