California Civil Code

SECTION 2945-2945.11 

2945.  (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 pursuant to Section 2924 until

the time surplus funds from any foreclosure sale are distributed to

the homeowner or his or her successor.  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.

2945.1.  The following definitions apply to this chapter:

  (a) "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.

   (b) 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.

   (2) A person licensed under Division 3 (commencing with Section

12000) of the Financial Code when the person is acting as a pro rater

as defined therein.

   (3) A person licensed under Part 1 (commencing with Section 10000)

of Division 4 of the Business and Professions Code when the person

makes a direct loan or when the person (A) engages in acts whose

performance requires licensure under that part, (B) is entitled to

compensation for the acts performed in connection with the sale of a

residence in foreclosure or with the arranging of a loan secured by a

lien on a residence in foreclosure, (C) does not claim, demand,

charge, collect, or receive any compensation until the acts have been

performed or cannot be performed because of an owner's failure to

make the disclosures set forth in Section 10243 of the Business and

Professions Code or failure to accept an offer from a purchaser or

lender ready, willing, and able to purchase a residence in

foreclosure or make a loan secured by a lien on a residence in

foreclosure on the terms prescribed in a listing or a loan agreement,

and (D) does not acquire any interest in a residence in foreclosure

directly from an owner for whom the person agreed to perform the acts

other than as a trustee or beneficiary under a deed of trust given

to secure the payment of a loan or that compensation.  For the

purposes of this paragraph, a "direct loan" means a loan of a real

estate broker's own funds secured by a deed of trust on the residence

in foreclosure, which loan and deed of trust the broker in good

faith attempts to assign to a lender, for an amount at least

sufficient to cure all of the defaults on obligations which are then

subject to a recorded notice of default, provided that, if a

foreclosure sale is conducted with respect to the deed of trust, the

person conducting the foreclosure sale has no interest in the

residence in foreclosure or in the outcome of the sale and is not

owned, controlled, or managed by the lending broker; the lending

broker does not acquire any interest in the residence in foreclosure

directly from the owner other than as a beneficiary under the deed of

trust; and the loan is not made for the purpose or effect of

avoiding or evading the provisions of this article.

   (4) A person licensed under Chapter 1 (commencing with Section

5000) of Division 3 of the Business and Professions Code when the

person is acting in any capacity for which the person is licensed

under those provisions.

   (5) A person or his or her authorized agent acting under the

express authority or written approval of the Department of Housing

and Urban Development or other department or agency of the United

States or this state to provide services.

   (6) A person who holds or is owed an obligation secured by a lien

on any residence in foreclosure when the person performs services in

connection with this obligation or lien.

   (7) Any person licensed to make loans pursuant to Division 9

(commencing with Section 22000), 10 (commencing with Section 24000),

or 11 (commencing with Section 26000) of the Financial Code, subject

to the authority of the Commissioner of Corporations to terminate

this exclusion, after notice and hearing, for any person licensed

pursuant to any of those divisions upon a finding that the licensee

is found to have engaged in practices described in subdivision (a) of

Section 2945.

   (8) Any person or entity doing business under any law of this

state, or of the United States relating to banks, trust companies,

savings and loan associations, industrial loan companies, pension

trusts, credit unions, insurance companies, or any person or entity

authorized under the laws of this state to conduct a title or escrow

business, or a mortgagee which is a United States Department of

Housing and Urban Development approved mortgagee and any subsidiary

or affiliate of the above, and any agent or employee of the above

while engaged in the business of these persons or entities.

   (9) A person licensed as a residential mortgage lender or servicer

pursuant to Division 20 (commencing with Section 50000) of the

Financial Code, when acting under the authority of that license.

   (c) Notwithstanding subdivision (b), any person who provides

services pursuant to paragraph (9) of subdivision (a) is a

foreclosure consultant unless he or she is the owner's attorney.

   (d) "Person" means any individual, partnership, corporation,

limited liability company, association or other group, however

organized.

   (e) "Service" means and includes, but is not limited to, any of

the following:

   (1) Debt, budget, or financial counseling of any type.

   (2) Receiving money for the purpose of distributing it to

creditors in payment or partial payment of any obligation secured by

a lien on a residence in foreclosure.

   (3) Contacting creditors on behalf of an owner of a residence in

foreclosure.

   (4) Arranging or attempting to arrange for an extension of the

period within which the owner of a residence in foreclosure may cure

his or her default and reinstate his or her obligation pursuant to

Section 2924c.

   (5) Arranging or attempting to arrange for any delay or

postponement of the time of sale of the residence in foreclosure.

   (6) Advising the filing of any document or assisting in any manner

in the preparation of any document for filing with any bankruptcy

court.

   (7) Giving any advice, explanation or instruction to an owner of a

residence in foreclosure which in any manner relates to the cure of

a default in or the reinstatement of an obligation secured by a lien

on the residence in foreclosure, the full satisfaction of that

obligation, or the postponement or avoidance of a sale of a residence

in foreclosure pursuant to a power of sale contained in any deed of

trust.

   (8) Arranging or attempting to arrange for the payment by the

beneficiary, mortgagee, trustee under a power of sale, or counsel for

the beneficiary, mortgagee, or trustee, of the remaining proceeds to

which the owner is entitled from a foreclosure sale of the owner's

residence in foreclosure.  Arranging or attempting to arrange for the

payment shall include any arrangement where the owner transfers or

assigns the right to the remaining proceeds of a foreclosure sale to

the foreclosure consultant or any person designated by the

foreclosure consultant, whether that transfer is effected by

agreement, assignment, deed, power of attorney, or assignment of

claim.

   (f) "Residence in foreclosure" means a residence in foreclosure as

defined in Section 1695.1.

   (g) "Owner" means a property owner as defined in Section 1695.1.

   (h) "Contract" means any agreement, or any term thereof, between a

foreclosure consultant and an owner for the rendition of any service

as defined in subdivision (e).

2945.2.  (a) In addition to any other right under law to rescind a

contract, an owner has the right to cancel such a contract until

midnight of the third "business day" as defined in subdivision (e) of

Section 1689.5 after the day on which the owner signs a contract

which complies with Section 2945.3.

   (b) Cancellation occurs when the owner gives written notice of

cancellation to the foreclosure consultant at the address specified

in the contract.

   (c) Notice of cancellation, if given by mail, is effective when

deposited in the mail properly addressed with postage prepaid.

   (d) Notice of cancellation given by the owner need not take the

particular form as provided with the contract and, however expressed,

is effective if it indicates the intention of the owner not to be

bound by the contract.

2945.3.  (a) Every contract shall be in writing and shall fully

disclose the exact nature of the foreclosure consultant's services

and the total amount and terms of compensation.

   (b) The following notice, printed in at least 14-point boldface

type and completed with the name of the foreclosure consultant, shall

be printed immediately above the statement required by subdivision

(c):

       "NOTICE REQUIRED BY CALIFORNIA LAW

_____________________________ or anyone working

            (Name)

for him or her CANNOT:

   (1) Take any money from you or ask you for money

until ________________________________________ has

                       (Name)

completely finished doing everything he or she

said he or she would do; and

   (2) Ask you to sign or have you sign any lien,

deed of trust, or deed."

   (c) The contract shall be written in the same language as

principally used by the foreclosure consultant to describe his or her

services or to negotiate the contract; shall be dated and signed by

the owner; and shall contain in immediate proximity to the space

reserved for the owner's signature a conspicuous statement in a size

equal to at least 10-point boldface type, as follows: "You, the

owner, may cancel this transaction at any time prior to midnight of

the third business day after the date of this transaction. See the

attached notice of cancellation form for an explanation of this

right."

   (d) The contract shall contain on the first page, in a type size

no smaller than that generally used in the body of the document, each

of the following:

   (1) The name and address of the foreclosure consultant to which

the notice or cancellation is to be mailed.

   (2) The date the owner signed the contract.

   (e) The contract shall be accompanied by a completed form in

duplicate, captioned "notice of cancellation," which shall be

attached to the contract, shall be easily detachable, and shall

contain in type of at least 10-point the following statement written

in the same language as used in the contract:

          "NOTICE OF CANCELLATION

_____________________________________________

  (Enter date of transaction)      (Date)

   You may cancel this transaction, without any

penalty or obligation, within three business days

from the above date.

   To cancel this transaction, mail or deliver a

signed and dated copy of this cancellation notice,

or any other written notice, or send a telegram to

__________________________________________________

        (Name of foreclosure consultant)

at

__________________________________________________

   (Address of foreclosure consultant's place of

                    business)

NOT LATER THAN MIDNIGHT OF _______________________.

                                    (Date)

  I hereby cancel this transaction

__________________________________________________.

                                   (Date)

________________________________________________"

   (Owner's signature)

   (f) The foreclosure consultant shall provide the owner with a copy

of the contract and the attached notice of cancellation.

   (g) Until the foreclosure consultant has complied with this

section, the owner may cancel the contract.

   (h) After the 65-day period following the foreclosure sale, the

foreclosure consultant may enter into a contract to assist the owner

in arranging, or arrange for the owner, the release of funds

remaining after the foreclosure sale ("surplus funds") from the

beneficiary, mortgagee, trustee under a power of sale, or counsel for

the beneficiary, mortgagee, or trustee. However, prior to entering

into that contract, the foreclosure consultant shall do all of the

following:

   (1) Prepare and deliver to the owner a notice in 14-point boldface

type and substantially in the form set forth below.

   (2) Obtain a receipt executed by each owner and acknowledged

before a notary public, acknowledging a copy of the notice set forth

below.

               "NOTICE TO OWNER

____________________  ________________________

  (Date of Contract)    (Date signed by Owner)

____________________________

  (Date of Foreclosure Sale)

You may be entitled to receive all or a portion

of the surplus funds generated from the

foreclosure sale of your real property located

at: __________________________, California on

_________________________without paying any fees

or costs of any kind to a third party. You

should check directly with the trustee or

beneficiary who conducted the foreclosure sale

of your property to determine the name, address,

and telephone number of the party to whom you

can direct inquiries regarding filing a claim

for surplus funds without paying a fee to a

third party. No person or entity may require you

to enter into any agreement requiring the

payment of a fee to that person or entity in

order to receive the surplus funds from

the foreclosure sale to which you may be

entitled during the 65 days after the date of

the trustee's sale."

2945.4.  It shall be a violation for a foreclosure consultant to:

   (a) Claim, demand, charge, collect, or receive any compensation

until after the foreclosure consultant has fully performed each and

every service the foreclosure consultant contracted to perform or

represented that he or she would perform.

   (b) Claim, demand, charge, collect, or receive any fee, interest,

or any other compensation for any reason which exceeds 10 percent per

annum of the amount of any loan which the foreclosure consultant may

make to the owner.

   (c) Take any wage assignment, any lien of any type on real or

personal property, or other security to secure the payment of

compensation.  That security shall be void and unenforceable.

   (d) Receive any consideration from any third party in connection

with services rendered to an owner unless that consideration is fully

disclosed to the owner.

   (e) Acquire any interest in a residence in foreclosure from an

owner with whom the foreclosure consultant has contracted.  Any

interest acquired in violation of this subdivision shall be void able,

provided that nothing herein shall affect or defeat the title of a

bona fide purchaser or encumbrancer for value and without notice of a

violation of this article.  Knowledge that the property was

"residential real property in foreclosure," does not constitute

notice of a violation of this article.  This subdivision may not be

deemed to abrogate any duty of inquiry which exists as to rights or

interests of persons in possession of residential real property in

foreclosure.

   (f) Take any power of attorney from an owner for any purpose,

except to inspect documents as provided by law.

   (g) Induce or attempt to induce any owner to enter into a contract

which does not comply in all respects with Sections 2945.2 and

2945.3.

   (h) Enter into an agreement to assist the owner in arranging, or

arrange for the owner, the release of surplus funds prior to 65 days

after the trustee's sale is conducted, whether the agreement involves

direct payment, assignment, deed, power of attorney, or assignment

of claim from an owner to the foreclosure consultant or any person

designated by the foreclosure consultant.

2945.5.  Any waiver by an owner of the provisions of this article

shall be deemed void and unenforceable as contrary to public policy.

Any attempt by a foreclosure consultant to induce an owner to waive

his rights shall be deemed a violation of this article.

2945.6.  (a) An owner may bring an action against a foreclosure

consultant for any violation of this chapter.  Judgment shall be

entered for actual damages, reasonable attorneys' fees and costs, and

appropriate equitable relief.  The court also may, in its

discretion, award exemplary damages and shall award exemplary damages

equivalent to at least three times the compensation received by the

foreclosure consultant in violation of subdivision (a), (b), or (d)

of Section 2945.4, and three times the owner's actual damages for any

violation of subdivision (c), (e), or (g) of Section 2945.4, in

addition to any other award of actual or exemplary damages.

   (b) The rights and remedies provided in subdivision (a) are

cumulative to, and not a limitation of, any other rights and remedies

provided by law.  Any action brought pursuant to this section shall

be commenced within four years from the date of the alleged

violation.

2945.7.  Any person who commits any violation described in Section

2945.4 shall be punished by a fine of not more than ten thousand

dollars ($10,000), by imprisonment in the county jail for not more

than one year, or in the state prison, or by both that fine and

imprisonment for each violation.  These penalties are cumulative to

any other remedies or penalties provided by law.

2945.8.  If any provision of this article or the application thereof

to any person or circumstance is held to be unconstitutional, the

remainder of the article and the application of such provision to

other persons and circumstances shall not be affected thereby.

2945.9.  (a) A foreclosure consultant is liable for all damages

resulting from any statement made or act committed by the foreclosure

consultant's representative in any manner connected with the

foreclosure consultant's (1) performance, offer to perform, or

contract to perform any of the services described in subdivision (a)

of Section 2945.1, (2) receipt of any consideration or property from

or on behalf of an owner, or (3) performance of any act prohibited by

this article.

   (b) "Representative" for the purposes of this section means a

person who in any manner solicits, induces, or causes (1) any owner

to contract with a foreclosure consultant, (2) any owner to pay any

consideration or transfer title to the residence in foreclosure to

the foreclosure consultant, or (3) any member of the owner's family

or household to induce or cause any owner to pay any consideration or

transfer title to the residence in foreclosure to the foreclosure

consultant.

2945.10.  (a) Any provision in a contract which attempts or purports

to limit the liability of the foreclosure consultant under Section

2945.9 shall be void and shall at the option of the owner render the

contract void.  The foreclosure consultant shall be liable to the

owner for all damages proximately caused by that provision.  Any

provision in a contract which attempts or purports to require

arbitration of any dispute arising under this chapter shall be void

at the option of the owner only upon grounds as exist for the

revocation of any contract.

   (b) This section shall apply to any contract entered into on or

after January 1, 1991.

2945.11.  (a) Any representative, as defined in subdivision (b) of

Section 2945.9, deemed to be the agent or employee or both the agent

and the employee of the foreclosure consultant shall be required to

provide both of the following:

   (1) Written proof to the owner that the representative has a valid

current California Real Estate Sales License and that the

representative is bonded by an admitted surety insurer in an amount

equal to at least twice the fair market value of the real property

that is the subject of the contract.

   (2) A statement in writing, under penalty of perjury, that the

representative has a valid current California Real Estate Sales

License, that the representative is bonded by an admitted surety

insurer in an amount equal to at least twice the value of the real

property that is the subject of the contract and has complied with

paragraph (1).  The written statement required by this paragraph

shall be provided to all parties to the contract prior to the

transfer of any interest in the real property that is the subject of

the contract.

   (b) The failure to comply with subdivision (a) shall, at the

option of the owner, render the contract void and the foreclosure

consultant shall be liable to the owner for all damages proximately

caused by the failure to comply.