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Be On Guard Of The Pirate Ships

By - Email Editor

Date : February 5, 2009

Dear Valued Reader,

The craze right now for former loan brokers is to become a loan modification specialist or worst yet, illegal pirates with no professional responsibility. In states like California, it is illegal for anyone except attorneys to take a fee before they provide the assistance. The rationale is because attorney’s are held to the highest standard and are members of each state’s bar whereas brokers nearly no duty to anyone, and then you have pirates whose only duty is to gain booty and that means your wallet. Legislation requires that brokers and others trying to be foreclosure consultants do the loan modification first and ask for fees after the work is done. This law is in force to protect consumers because they are vulnerable and many of these unlicensed pirates and mortgage brokers have abused their relationships in the past and done nothing to help a troubled home owner while still taking a fee from them..

Recently a mortgage modification shop was shut down by the California Attorney General’s office and the attorney who worked “with them” was brought into the unlawful liability since he never undertook any of the consumers as clients under an attorney/client relationship. Therefore, they were prohibited from taking an upfront fee and should have performed the services first and then tried to collect which typically is hard to do so that is the reason many are trying to ‘work with’ attorneys but both are misinformed on the law and this is probably the first of many more cases to come because it generates revenue for the state…millions in fines for getting this WRONG. This is all laid out in California Civil Code section 2945.1 subdivision (a) as it describes a foreclosure consultant and if it walks like a duck and it quacks like a duck it is a duck.

This sends a shockwave through this mass market where many think they can just be pirates and steer consumers into their cannon sites for a bilking. Seeking a loan modification or short sale in these tumultuous financial times should be a legal play as the clients need the attorney/client privilege when submitting their documents to the bank looking for relief. These cases are hardship driven and many consumers tried to be real estate investors who forgot that the real estate club they went to that sold them 5 or 10 properties at a time were salespeople doing what salespeople do; sell you as much of a product as frequently as they can. Many of the loan broker’s working with these investment clubs probably stretched the boundaries of reality as they made a case for income under a stated loan helping someone buy 5 or more properties at the same time when they truly had the income to handle their own personal residence with no financial hiccups.

Some prosecutors are now pursuing borrowers as you can read in this article.

A broker or band of modification pirates cannot guarantee the distressed borrower that their submitted documents for the modification will not be used against them in the future. As you’ll read in the link above, some prosecutors will be going after borrowers for participating in fraud by overstating their true income. What this does is make your submission to the lender vulnerable unless you have the attorney/client privilege over your submission…hence the modification process should be a legal maneuver not Joe the Modifier who may be a Pirate that has no right to take an advance fee.

If you must send your clients to a friend who is a broker – make sure they are one of the firms listed on the Department of Real Estate’s website as approved to take an advance fee as many are doing it illegally and offer no real value since they can’t prevent the documents from being used against the borrower because there is no such thing as broker/client privilege.

Not everyone will be a loan modification as we are seeing the abuse of the stated income loan in a gross proportion which makes there no way to modify certain loans unless principal was to be drastically reduced which is happening in limited circumstances and was announced by the press that it was being considered by the government in order to find the market bottom; only time will tell.

James Burns, Esq.
TrustMakers.com

 

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