New Law states that Loan Modifications
are in the best interest of all parties and
lenders may reduce loan to present Fair
CALIFORNIA CIVIL CODE SECTION 2923.6
(a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling and servicing agreements is owed to
all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interests of all
parties if it agrees to or implements a loan modification or workout plan for which both of the following
(1) The loan is in payment default, or payment default is reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery
through foreclosure on a net present value basis.
(b) It is the intent of the Legislature that the mortgagee, beneficiary, or authorized agent offer the borrower
a loan modification or workout plan if such a modification or plan is consistent with its contractual or other
(c) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a
later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.
What does this all mean?
1. If you are now facing a financial hardship you are able to negotiate a loan modification prior to going into
default. This is huge! Prior to the passage of this law banks would not work with borrowers to modify
mortgages until after they were behind on their payments.
2. When requesting a loan modification it is now seemingly mandatory that your lender lower your loan to a
market value that is at least at fair market value, if not lower. The value could be lower because it takes an
estimated $50,000 for banks to complete the foreclosure process and the market reality that homes in
foreclosure often sell for 30%-40% less than fair market value.
Please feel free to contact us if you have further questions or are seeking assistance.
If you hire someone to help you with a loan modification you should also be aware of the following
foreclosure consultants law.
CIVIL CODE SECTION 2945-2945.11
(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.
(c) The intent and purposes of this article are the following:
(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.
2945.1. DEFINITION OF FORECLOSURE CONSULTANT
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
(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 makes a direct loan or when the person (A) engages in acts whose performance requires licensure under that part, (B)
is entitled to compensation for the acts performed in connection with the sale of a residence in foreclosure or with the arranging
of a loan secured by a lien on a residence in foreclosure, (C) does not claim, demand, charge, collect, or receive any
compensation until the acts have been performed or cannot be performed because of an owner's failure to make the disclosures
set forth in Section 10243 of the Business and Professions Code or failure to accept an offer from a purchaser or lender ready,
willing, and able to purchase a residence in
foreclosure or make a loan secured by a lien on a residence in
foreclosure on the terms prescribed in a listing or a loan agreement, and (D) does not acquire any interest in a residence in
foreclosure directly from an owner for whom the person agreed to perform the acts other than as a trustee or beneficiary under a
deed of trust given to secure the payment of a loan or that compensation. For the purposes of this paragraph, a "direct loan"
means a loan of a real estate broker's own funds secured by a deed of trust on the residence
in foreclosure, which loan and deed of trust the broker in good
faith attempts to assign to a lender, for an amount at least
sufficient to cure all of the defaults on obligations which are then subject to a recorded notice of default, provided that, if a
foreclosure sale is conducted with respect to the deed of trust, the person conducting the foreclosure sale has no interest in the
residence in foreclosure or in the outcome of the sale and is not owned, controlled, or managed by the lending broker; the
lending broker does not acquire any interest in the residence in foreclosure directly from the owner other than as a beneficiary
under the deed of trust; and the loan is not made for the purpose or effect of avoiding or evading the provisions of this article.
(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), 10 (commencing with Section 24000), or 11 (commencing with Section 26000) of the Financial
Code, subject to the authority of the Commissioner of Corporations to terminate this exclusion, after notice and hearing, for any
person licensed pursuant to any of those divisions upon a finding that the licensee is found to have engaged in practices
described in subdivision (a) of
(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
(e) "Service" means and includes, but is not limited to, any of
(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
(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.
(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).
2945.2. RIGHT TO CANCEL CONTRACT
(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 third "business day" as defined in subdivision (e) of Section 1689.5 after the day on which the owner signs a
contract which complies with Section 2945.3.
(b) Cancellation occurs when the owner gives written notice of
cancellation to the foreclosure consultant at the address specified in the contract.
(c) Notice of cancellation, if given by mail, is effective when
deposited in the mail properly addressed with postage prepaid.
(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.
2945.3. CONTRACT REQUIREMENTS
(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
"NOTICE REQUIRED BY CALIFORNIA LAW
(Name) or anyone working for him or her CANNOT:
(1) Take any money from you or ask you for money until (Name) has 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; 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 third business day after the date of this transaction. See the attached notice of cancellation form for an
explanation of this right."
(d) 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 and address of the foreclosure consultant to which the notice or cancellation is to be mailed.
(2) The date the owner signed the contract.
(e) 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 three 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 to
(Name of foreclosure consultant)
(Address of foreclosure consultant's place of
NOT LATER THAN MIDNIGHT OF _______________________.
I hereby cancel this transaction
(f) The foreclosure consultant shall provide the owner with a copy of the contract and the attached notice of cancellation.
(g) Until the foreclosure consultant has complied with this
section, the owner may cancel the contract.
(h) After the 65-day period following the foreclosure sale, the
foreclosure consultant may enter into a contract to assist the owner in arranging, or arrange for the owner, the release of funds
remaining after the foreclosure sale ("surplus funds") from the beneficiary, mortgagee, trustee under a power of sale, or
counsel for the beneficiary, mortgagee, or trustee. However, prior to entering into that contract, the foreclosure consultant shall
do all of the following:
(1) Prepare and deliver to the owner a notice in 14-point boldface type and substantially in the form set forth below.
(2) Obtain a receipt executed by each owner and acknowledged
before a notary public, acknowledging a copy of the notice set forth below.
"NOTICE TO OWNER
(Date of Contract) (Date signed by Owner)
(Date of Foreclosure Sale)
You may be entitled to receive all or a portion of the surplus funds generated from the foreclosure sale of your real property
located at: __________________________, California on
_________________________without paying any fees or costs of any kind to a third party. You should check directly with the
trustee or beneficiary who conducted the foreclosure sale
of your property to determine the name, address, and telephone number of the party to whom you can direct inquiries regarding
filing a claim for surplus funds without paying a fee to a third party. No person or entity may require you to enter into any
agreement requiring the payment of a fee to that person or entity in order to receive the surplus funds from
the foreclosure sale to which you may be entitled during the 65 days after the date of the trustee's sale."
2945.4. PAYMENT AT COMPLETION OF TRANSACTION
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,
except to inspect documents as provided by law.
(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
(h) Enter into an agreement to assist the owner in arranging, or arrange for the owner, the release of surplus funds prior to 65
days after the trustee's sale is conducted, whether the agreement involves direct payment, assignment, deed, power of attorney,
or assignment of claim from an owner to the foreclosure consultant or any person designated by the foreclosure consultant.
2945.5. NO WAIVER
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.
(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
(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.
2945.7. PUNISHABLE AS A CRIME
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 in the state prison, or by both that fine and imprisonment for each violation. These penalties are
cumulative to any other remedies or penalties provided by law.
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.
2945.9. LIABILITY FOR REPRESENTATIVES
(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.
2945.10. NO LIMITATION OF LIABILITY
(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.
2945.11. REQUIREMENTS OF REPRESENTATIVE
(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.
We serve the North San Diego Communities of Del Mar, Solana Beach, Rancho Santa
Fe, Encinitas, Leucadia, Carlsbad, Oceanside, Rancho Bernardo, Poway, Escondido
and San Marcos
modification law now
helps borrowers in