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 of the foreclosure sale. 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.
(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) 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 prorater 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) "Person" means any individual, partnership, corporation, limited liability
company, association or other group, however organized.
(d) "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.
(e) "Residence in foreclosure" means a residence in foreclosure as defined in
Section 1695.1.
(f) "Owner" means a property owner as defined in Section 1695.1.
(g) "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 (d).
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 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 bold 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.
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 he 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. Any such
security shall be void and unenforceable.
(d) Receive any consideration from any third party in connection with services
rendered to an owner unless such 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 voidable, 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," shall not constitute notice of
a violation of this article. This subdivision shall 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 a contract which does not
comply in all respects with Sections 2945.2 and 2945.3.
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 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 or 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.
