CA Attorney General Directs Foreclosure Consultants to Register and Post Bond

California Attorney General's Office News Release
Attorney General Edmund G. Brown Jr. issued a directive June 1, 2009 forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009. Those who fail to do so will be in violation of California Civil Code Section 2945.45 (of the Mortgage Foreclosure Consultant Law) that goes into effect July 1, 2009, and be subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

However, Section 2945.45 does not apply to real estate licensees provided the licensee complies with Section 2945.1. Real estate licensees are exempt from the Mortgage Foreclosure Consultant Law (including the Section 2945.45 registration and bond requirements) when the licensee:

"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." (Cal. Civ. Code 2945.1.)

For a copy of the law modifying the Mortgage Foreclosure Consultants Law, AB 180, click here.

For more information about the AG news release, click here.