Loan Modification Companies and the Law

If you are operating a loan modification business, it is imperative that you are informed about the laws that apply to your company. Each state has different statutes and regulations describing who may modify mortgages for homeowners and how the process must proceed.
Some states are fraught with oversight and regulations, such as the requirement that anyone working as a loan modification consultant must have a mortgage broker license or be an attorney. Alternatively, other states have almost no guidelines regarding mortgage loan modifications. In response to the state of our economy, many states are currently creating, changing or adding loan modification requirements, which can be confusing to navigate. If you don’t know the regulations in your state, you should seek help from a legal professional.
Fraud Protection in Florida
On October 1, 2008, the Florida Legislature enacted the Florida Foreclosure Fraud Protection Act. This law prohibits loan modification companies from receiving upfront payments for loan modification services that may never be rendered. This law also mandates that homeowners must receive specific written disclosures informing them of their rights and a “cooling off” period.
The new law, Fla. Stat. Sec. 501.1377, was intended to protect the consumer, but it may ultimately hurt the very people it meant to protect. Some bad apples created a negative perception of the loan modification industry, which is unfair. Reputable loan modification companies have been providing a very valuable and much needed service to the consumer − loans are being modified at very favorable terms, which include interest rate and sometimes principal rate reductions.
By conducting audits of the loan in question and detecting errors or insufficient disclosures, loan modification companies are very effective in exerting pressure on financial institutions to modify loans or face the consequences of those violations. Banks can sometimes be difficult to reach, which requires persistent staff from these loan modification companies to maintain communication with them. All of these efforts result in significant overhead, which loan modification companies must front. By creating a law, which makes it illegal for a loan modification company to receive an upfront payment until the benefit is obtained; loan modification companies have to stay afloat until the bank decides to resolve a claim.
Under this present scheme, banks are fully aware of the financial strain placed on the loan modification companies and, thus, have no incentive to resolve a modification expeditiously. Secondly, once the loan modification company obtains the benefit, there is less of an incentive for the consumer to pay the fee to the loan modification company.
Regulation of Loan Modification Companies
Other states are also providing strong regulatory protection to consumers needing loan modifications. In California, loan modification companies must be licensed with the Department of Real Estate (DRE). In order to collect advance money, brokers must have a specific agreement called an Advance Fee Agreement, approved by the DRE. Under the California Foreclosure Consultants Act, brokers are not permitted to collect advance fees if a notice of default has been recorded against a property.
Additionally, a new organization designed to help the loan modification industry police itself was formed this year. The National Loan Modification Association of America (NLMAA) was founded to help ensure that clients of loan modification companies are dealt with fairly and honestly. The organization’s goal is to have members who commit to a code of ethics when working with consumers.
It is important that loan modification companies have a compliance program in place to navigate the labyrinth of laws and regulations. The first course of action in implementing a compliance plan is to contact an attorney who is experienced in wading through the relevant rules and regulations.
Conclusion
With the new laws in place, there may be some loan modification companies who have violated the law unwittingly. If you have been contacted by law enforcement about an investigation or are being prosecuted for fraud in relation to your role in providing loan modification services, you should hire a skilled and respected criminal defense attorney from the outset. The penalties for violating laws against fraud may be severe and it is in your best interest to hire an experienced criminal defense attorney who is familiar with the nuances of the laws of your state.

Loan Modification Companies and the Law

If you are operating a loan modification business, it is imperative that you are informed about the laws that apply to your company. Each state has different statutes and regulations describing who may modify mortgages for homeowners and how the process must proceed.
Some states are fraught with oversight and regulations, such as the requirement that anyone working as a loan modification consultant must have a mortgage broker license or be an attorney. Alternatively, other states have almost no guidelines regarding mortgage loan modifications. In response to the state of our economy, many states are currently creating, changing or adding loan modification requirements, which can be confusing to navigate. If you don’t know the regulations in your state, you should seek help from a legal professional.
Fraud Protection in Florida
On October 1, 2008, the Florida Legislature enacted the Florida Foreclosure Fraud Protection Act. This law prohibits loan modification companies from receiving upfront payments for loan modification services that may never be rendered. This law also mandates that homeowners must receive specific written disclosures informing them of their rights and a “cooling off” period.
The new law, Fla. Stat. Sec. 501.1377, was intended to protect the consumer, but it may ultimately hurt the very people it meant to protect. Some bad apples created a negative perception of the loan modification industry, which is unfair. Reputable loan modification companies have been providing a very valuable and much needed service to the consumer − loans are being modified at very favorable terms, which include interest rate and sometimes principal rate reductions.
By conducting audits of the loan in question and detecting errors or insufficient disclosures, loan modification companies are very effective in exerting pressure on financial institutions to modify loans or face the consequences of those violations. Banks can sometimes be difficult to reach, which requires persistent staff from these loan modification companies to maintain communication with them. All of these efforts result in significant overhead, which loan modification companies must front. By creating a law, which makes it illegal for a loan modification company to receive an upfront payment until the benefit is obtained; loan modification companies have to stay afloat until the bank decides to resolve a claim.
Under this present scheme, banks are fully aware of the financial strain placed on the loan modification companies and, thus, have no incentive to resolve a modification expeditiously. Secondly, once the loan modification company obtains the benefit, there is less of an incentive for the consumer to pay the fee to the loan modification company.
Regulation of Loan Modification Companies
Other states are also providing strong regulatory protection to consumers needing loan modifications. In California, loan modification companies must be licensed with the Department of Real Estate (DRE). In order to collect advance money, brokers must have a specific agreement called an Advance Fee Agreement, approved by the DRE. Under the California Foreclosure Consultants Act, brokers are not permitted to collect advance fees if a notice of default has been recorded against a property.
Additionally, a new organization designed to help the loan modification industry police itself was formed this year. The National Loan Modification Association of America (NLMAA) was founded to help ensure that clients of loan modification companies are dealt with fairly and honestly. The organization’s goal is to have members who commit to a code of ethics when working with consumers.
It is important that loan modification companies have a compliance program in place to navigate the labyrinth of laws and regulations. The first course of action in implementing a compliance plan is to contact an attorney who is experienced in wading through the relevant rules and regulations.
Conclusion
With the new laws in place, there may be some loan modification companies who have violated the law unwittingly. If you have been contacted by law enforcement about an investigation or are being prosecuted for fraud in relation to your role in providing loan modification services, you should hire a skilled and respected criminal defense attorney from the outset. The penalties for violating laws against fraud may be severe and it is in your best interest to hire an experienced criminal defense attorney who is familiar with the nuances of the laws of your state.

Loan Modification Companies and the Law

If you are operating a loan modification business, it is imperative that you are informed about the laws that apply to your company. Each state has different statutes and regulations describing who may modify mortgages for homeowners and how the process must proceed.
Some states are fraught with oversight and regulations, such as the requirement that anyone working as a loan modification consultant must have a mortgage broker license or be an attorney. Alternatively, other states have almost no guidelines regarding mortgage loan modifications. In response to the state of our economy, many states are currently creating, changing or adding loan modification requirements, which can be confusing to navigate. If you don’t know the regulations in your state, you should seek help from a legal professional.
Fraud Protection in Florida
On October 1, 2008, the Florida Legislature enacted the Florida Foreclosure Fraud Protection Act. This law prohibits loan modification companies from receiving upfront payments for loan modification services that may never be rendered. This law also mandates that homeowners must receive specific written disclosures informing them of their rights and a “cooling off” period.
The new law, Fla. Stat. Sec. 501.1377, was intended to protect the consumer, but it may ultimately hurt the very people it meant to protect. Some bad apples created a negative perception of the loan modification industry, which is unfair. Reputable loan modification companies have been providing a very valuable and much needed service to the consumer − loans are being modified at very favorable terms, which include interest rate and sometimes principal rate reductions.
By conducting audits of the loan in question and detecting errors or insufficient disclosures, loan modification companies are very effective in exerting pressure on financial institutions to modify loans or face the consequences of those violations. Banks can sometimes be difficult to reach, which requires persistent staff from these loan modification companies to maintain communication with them. All of these efforts result in significant overhead, which loan modification companies must front. By creating a law, which makes it illegal for a loan modification company to receive an upfront payment until the benefit is obtained; loan modification companies have to stay afloat until the bank decides to resolve a claim.
Under this present scheme, banks are fully aware of the financial strain placed on the loan modification companies and, thus, have no incentive to resolve a modification expeditiously. Secondly, once the loan modification company obtains the benefit, there is less of an incentive for the consumer to pay the fee to the loan modification company.
Regulation of Loan Modification Companies
Other states are also providing strong regulatory protection to consumers needing loan modifications. In California, loan modification companies must be licensed with the Department of Real Estate (DRE). In order to collect advance money, brokers must have a specific agreement called an Advance Fee Agreement, approved by the DRE. Under the California Foreclosure Consultants Act, brokers are not permitted to collect advance fees if a notice of default has been recorded against a property.
Additionally, a new organization designed to help the loan modification industry police itself was formed this year. The National Loan Modification Association of America (NLMAA) was founded to help ensure that clients of loan modification companies are dealt with fairly and honestly. The organization’s goal is to have members who commit to a code of ethics when working with consumers.
It is important that loan modification companies have a compliance program in place to navigate the labyrinth of laws and regulations. The first course of action in implementing a compliance plan is to contact an attorney who is experienced in wading through the relevant rules and regulations.
Conclusion
With the new laws in place, there may be some loan modification companies who have violated the law unwittingly. If you have been contacted by law enforcement about an investigation or are being prosecuted for fraud in relation to your role in providing loan modification services, you should hire a skilled and respected criminal defense attorney from the outset. The penalties for violating laws against fraud may be severe and it is in your best interest to hire an experienced criminal defense attorney who is familiar with the nuances of the laws of your state.