Advance Fees Loan Modifications A FOCUS ON CONSUMER

Advance Fees & Loan Modifications A FOCUS ON CONSUMER PROTECTION

Purpose of the Advance Fee Law Legislation created in the 1950’s To ensure brokers perform the services promised for the Advance Fee

Definitions What is an Advance Fee? The collection of an upfront fee for the purpose of promoting the sale or lease of real property The collection of an upfront fee for the purpose of performing services for borrowers or lenders in connection with loans secured by real property

Who can Collect Advance Fees for Loan Modification Services? Attorneys who are providing legal services (acting within the scope of his or her license) Real Estate Brokers Provided the agreement has been vetted by the DRE Provided a Notice of Default has not been filed

Requirements for the Collection of Advance Fees by a Real Estate Broker Must submit agreement and solicitation materials to DRE to ensure the DRE does not object to their use Agreement must specify the services to be rendered Must deposit the advance fee into a trust account Only expend fee on the promised services Must provide the principal with an accounting of the advance fee

Requirements for the Collection of Advance Fees Refund any unearned portion of the advance fee No advance fee may be collected after a NOD has been recorded Exceptions to Advance Fee Requirements Upfront appraisal and credit report fees Upfront tenant “screening fees” for residential rentals

Advance Fee Contracts Submitted to the DRE 291 300 Total Contracts Submitted = 1610 Total No objection letters issued = 620 243 250 236 225 226 200 147 150 132 115 96 100 68 56 52 42 50 28 23 5 1 5 4 3 0 0 6/08 7/08 8/08 9/08 10/08 11/08 Month/Year 12/08 1/09 2/09 3/09 4/09 232

Advance Fee Agreement Listing www. dre. ca. gov/mlb_adv_fee. html

Desist and Refrain Orders and/or Accusations for Loan Modification Activities http: //www. dre. ca. gov/cons_Dand. R. html

Consumer Education Consumer Alert – Advance Fees and Loan Modification Services http: //www. dre. ca. gov/cons_adv_fees_alert. html

Consumer Protections http: //www. dre. ca. gov/pre_psa. html

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