Visionary Home Builders of California

Fees and Loan Modifications:

With dramatic increase in foreclosure, drastic drops in property values, stagnant sales and collapsing financial markets as a result of the housing crisis we are, metaphorically speaking, in “the eye of the storm,” a slow yet disastrous storm at that. In fact, the global financial services company UBS projects the year 2009 will be worse and that the housing and financial market situation will continue to deteriorate for at least another 2 years.

Due to the crisis, the number of foreclosures — especially in our own community (Stockton, CA) — has reached unprecedented levels. Due to the scale and magnitude of the crisis banks and lending institutions have become overwhelmed and in the opinion of many homeowners have become indifferent to their pain and hardship. This situation has left many homeowners in the dark; an almost helpless situation. Fortunately, HUD-approved counseling agencies such as Visionary Home Builders (VHB) have stepped up to the plate and continue to be a vital resource for many facing foreclosure. Unfortunately, just as individuals and entities have stepped up to help, many unscrupulous ones have also come forward to take advantage of the situation.

HUD-approved counseling agencies such as VHB often offer their services for free and are subject to Federal regulation and oversight in order to ensure that they are fulfilling their role. Unscrupulous “mortgage consultants” are often aggressive in their approach, make outlandish claims and charge high prices for their services. In fact, in one incident I contacted one of these so called mortgage consultants. When questioned, the representative for this organization asserted that they have a “95% success rate” without being able to clearly define what “success” constitutes or give me a specific number of clients that they have been successful with. Subsequently, the representative stated that the fee for the service was $700 dollars with $300 due in advance. While the representative’s story and claims all seemed a bit suspicious, what raised the red flag was the advance fee requirement.

As a homeowner one has to be cautious when asked to pay for foreclosure counseling services and especially cautious when asked for an advance fee. California Civil Code 2945 regulates mortgage consultants and forbids anyone identifying themselves as such to collect advance fees if a client’s property has had a Notice of Default recorded against it. Mortgage brokers or foreclosure consultants that do charge fees can only do so once their work has been completed.

If a Notice of Default has not been recorded, it is possible for a consultant or mortgage broker to assist in a loan modification and ask for an advance fee. However, if this occurs, the broker or consultant is obligated to provide a signed statement specifying what will be performed, when it will be performed and all costs associated. The statement must then be forwarded to the Department of Real Estate for approval. Once approved by the Department of Real Estate the broker or consultant can collect the fee.

It is often argued that at the root of the housing crisis there were a slew of dishonest and manipulative individuals who took advantage of the ignorance of consumers to ensure their own financial gain. It appears these seedy elements are once again rearing their ugly heads, poised to take advantage of vulnerable homeowners who may already be experiencing difficulties. As homeowners and consumers we have the responsibility to ensure that we are well informed and more critical of the decisions we make in order to ensure the effects of this crisis are not compounded. For these reasons it is necessary to at least have a basic understanding this law.