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