A FOCUS ON CONSUMER PROTECTION
Purpose of the Advance Fee LawLegislation created in the 1950’s
To ensure brokers perform the services promised for the Advance Fee
DefinitionsWhat is an Advance Fee?
The collection of an upfront fee for the purpose of promoting the sale or lease of real property
The collection of an upfront fee for the purpose of performing services for borrowers or lenders in connection with loans secured by real property
Who can Collect Advance Fees for Loan Modification Services?
Attorneys who are providing legal services (acting within the scope of his or her license)
Real Estate Brokers Provided the agreement has been vetted by the DRE Provided a Notice of Default has not been filed
Requirements for the Collection of Advance Feesby a Real Estate Broker
Must submit agreement and solicitation materials to DRE to ensure the DRE does not object to their use
Agreement must specify the services to be rendered
Must deposit the advance fee into a trust account
Only expend fee on the promised services
Must provide the principal with an accounting of the advance fee
Requirements for the Collection of Advance Fees
Refund any unearned portion of the advance fee
No advance fee may be collected after a NOD has been recorded
Exceptions to Advance Fee Requirements
Upfront appraisal and credit report fees
Upfront tenant “screening fees” for residential rentals
Advance Fee Contracts Submitted to the DRE
0
50
100
150
200
250
300
6/08 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09
5 1
28
0
42
3
52
4
115
5
147
23
226
56
236
96
243
68
291
132
225232
Month/Year
Total Contracts Submitted = 1610
Total No objection letters issued = 620
Advance Fee Agreement Listingwww.dre.ca.gov/mlb_adv_fee.html
Desist and Refrain Orders and/or Accusations for Loan Modification Activities
http://www.dre.ca.gov/cons_DandR.html
Consumer EducationConsumer Alert – Advance Fees and Loan Modification Services
http://www.dre.ca.gov/cons_adv_fees_alert.html
Consumer Protectionshttp://www.dre.ca.gov/pre_psa.html
Conclusion
Top Related