California Attorney General Brown Issues Directive to Foreclosure Consultants

Originally posted in June 2009.


Attorney General Edmund G. Brown Jr. issued a directive today that forces “foreclosure consultants” to register with the Attorney General’s office and post a $100,000 bond by July 1, 2009.

According to the press release issued by the AG’s office, the foreclosure consultants that fail to comply “will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation”.

“California is awash with con artists who prey on vulnerable families facing foreclosure,” Brown said. “By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world.”

To properly register with the AG’s office under this new directive, foreclosure consultants need to provide:

  • Name, address, and telephone number.
  • All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be 
used in connection with their business.
  • Copies of all advertising.
  • Copies of each different contract the consultant will use with consumers.
  • A copy of its $100,000 bond.

Those providing the proper information will receive a Certificate of Registration from the State Attorney General, however, the AG’s office may “refuse to issue, or choose to revoke, a company’s Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state’s foreclosure consultant laws, California’s false advertising, unfair or deceptive practices laws or other laws dealing with mortgages,” the press release said.

If a registered company subsequently violates the law related to providing services as a foreclosure consultant, a court can order that restitution be paid from the proceeds of the $100,000 bond. 

Time is of the essence, because the AG’s office says: “foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed and approved prior to July 1st.”

This new registry was established as a result of legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last in 2008. 

You can find a copy of the forms required to register at: under the “Foreclosure Consultant Registry.”

And, after July 1, 2009, consumers can call the Attorney General’s office to determine whether a company has been issued a Certificate of Registration, prior to engaging the assistance of that company.

The question, of course, is whether this new directive applies to only “foreclosure consultants,” as defined by the California laws governing foreclosure consultants, or whether the AG would like to see all loan modification firms, or even law firms, comply with this new requirement as well.

I called the Attorney General’s office this afternoon and was told that the answer, although not cut and dry, is probably “yes”.

The definition of “foreclosure consultant” appears to be found in California CIVIL CODE SECTION 2945-2945.11, as follows:

Foreclosure consultant” means any person who makes any solicitation, representation, or offer to any owner to perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner do any of the following:

  1. Stop or postpone the foreclosure sale.
  2. Obtain any forbearance from any beneficiary or mortgagee.
  3. Assist the owner to exercise the right of reinstatement provided in Section 2924c.
  4. Obtain any extension of the period within which the owner may reinstate his or her obligation.
  5. Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a deed of trust or mortgage on a residence in foreclosure or contained that deed of trust or mortgage.
  6. Assist the owner to obtain a loan or advance of funds.
  7. Avoid or ameliorate the impairment of the owner’s credit resulting from the recording of a notice of default or the conduct of a foreclosure sale.
  8. Save the owner’s residence from foreclosure.
  9. Assist the owner in obtaining from the beneficiary, mortgagee, trustee under a power of sale, or counsel for the beneficiary, mortgagee, or trustee, the remaining proceeds from the foreclosure sale of the owner’s residence.

As to law firms, the code also says that a foreclosure consultant does not include any of the following:

1. A person licensed to practice law in this state when the person renders service in the course of his or her practice as an attorney at law.

And there are others as well, mostly having to do with being a lender of some kind. To read the entire section of the code click here:

Here’s my take on what the AG’s office wants to have happen:

I think loan modification companies should consider registering with the Attorney General’s office, even though the new directive does not specifically name loan modification firms as being required to do so, and the representative of the AG’s office concurred, although he could not state an official position other than to refer me to the code as stated above.

The overriding point is that loan modification firms do, for the most part, offer to save a homeowner from foreclosure and that’s what it says in item #8 above, and in my mind at least, this is a step in the right direction: making private sector loan modification firms a legitimate source from which consumers can feel safe obtaining assistance.

I also asked the representative of the Attorney General’s office whether he thought that law firms offering such services should also consider registering, and he was less sure, saying that law firms should check with the State Bar Association. However, he did say that, if a law firm is handling foreclosure consulting type work as part of their normal practice, that’s one thing, but if the firm has added loan modification work to it’s existing practice, they may in fact want to register.

What does all that mean? I can’t be positive, but I do think that registering and posting a bond… if it makes the California AG more comfortable with private sector loan modification firms… then it’s a good thing.

One thing I know for sure… you should contact the State Attorney General’s Public Inquiry Unit at: 800-952-5225


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