Orange County Register

Some companies that advertise help avoiding foreclosure are trying to avoid a ban on advance fees by charging consumers in steps, according to loan brokers and state regulators.

That’s illegal, said Tom Pool, a spokesman for the California Department of Real Estate (DRE).

The bill, dubbed SB 94, clearly prohibits loan modification companies from collecting any money until all services are performed, Pool said. He said the DRE will investigate any consumer complaints related to companies skirting the advance-fee ban.

“We knew folks were going to be looking for ways around the bill, and we are seeing these creative and clever approaches,” Pool said. “We are not buying it.”

Consumers, however, must pay close attention to the loan-modification contract, Pool said. (A loan mod is when a lender changes the terms of a loan to make it more affordable instead of foreclosing on the borrower.)

For example, it could say that all service is complete once an application for a loan mod has been submitted to a lender, regardless of the outcome, he said. A fee could be collected at that time in compliance with SB 94, he said.

“It begs the question, Who is going to sign up for that?” Pool said. “Who is going to spend $3,000 on a crap-shoot.”

There are alternatives to paying a third-party for loan help.

Homeowners can attempt to negotiate their own loan modification or can seek free help from a nonprofit organization approved by the U.S. Department of Housing and Urban Development.

More on loan mods…

• Loan-aid lawyer surrenders license after sex with minor
• AG Brown to enforce ban on advance fees for mortgage aid
• What’s next if Obama’s loan mod plan fails?

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