By:  LINDSEY O'NEILL, ESQ.

Homeowners in California have been hit hard by foreclosure..... and where there is demand, supply will follow.   With so many people in need of foreclosure help, many companies have sprung up to offer foreclosure avoidance services.  Unfortunately, California has seen a high rate of fraudulent activity in this area.  The California Legislature has responded by enacted new laws to address the fraud. 

California Civil Code Section 2945 states: 

"(a) The Legislature finds and declares that homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded ...until [the property is foreclosed].  Foreclosure consultants represent that they can assist homeowners who have defaulted on obligations secured by their residences.  These foreclosure consultants, however, often charge high fees, the payment of which is often secured by a deed of trust on the residence to be saved, and perform no service or essentially a worthless service.  Homeowners, relying on the foreclosure consultants' promises of help, take no
other action, are diverted from lawful businesses which could render beneficial services, and often lose their homes, sometimes to the foreclosure consultants who purchase homes at a fraction of their value before the sale.  Vulnerable homeowners are increasingly relying on the services of foreclosure consultants who advise the homeowner that the foreclosure consultant can obtain the remaining funds from the foreclosure sale if the homeowner executes an assignment of the surplus, a deed, or a power of attorney in favor of the foreclosure consultant.  This results in the homeowner paying an exorbitant fee for a service when the homeowner could have obtained the remaining funds from the trustee's sale from the trustee directly for minimal cost if the homeowner had consulted legal counsel or had sufficient time to receive notices from the trustee pursuant to
Section 2924j regarding how and where to make a claim for excess proceeds.

"(b) The Legislature further finds and declares that foreclosure consultants have a significant impact on the economy of this state and on the welfare of its citizens.

"(c) The intent and purposes of this article are the following:
   (1) To require that foreclosure consultant service agreements be expressed in writing; to safeguard the public against deceit and financial hardship; to permit rescission of foreclosure consultation contracts; to prohibit representations that tend to mislead; and to encourage fair dealing in the rendition of foreclosure services.
   (2) The provisions of this article shall be liberally construed to effectuate this intent and to achieve these purposes.
The new California law gives homeowners varies rights to cancel a contract with a "foreclosure consultant" within a specified time frame.  The new law also prohibits foreclosure consultants from charging upfront fees for their services, obtaining a power of attorney from the homeowner, obtaining a lien on the homeowner's property or other mode of security to guarantee their right to compensation, or acquiring any interest in a residence in foreclosure from an owner with whom the foreclosure consultant has contracted.

If you're in danger of foreclosure or need help figuring out how to avoid foreclosure, contact a qualified attorney in your area.  An attorney can help you understand all your options.   

 Read the new California Foreclosure Consultant law here.