California AG: "Loan Modification Upfront Fee Loophole Has Now Been Closed!" - Law Violators To Get Up To 1 Year In Jail; $50K In Fines Possible

In Southern California, the Orange County Register reports:

• Attorney General Jerry Brown said [...] he will go after companies that violate the state’s new ban on collecting an advance fee for helping someone avoid foreclosure. [...] Governor Arnold Schwarzenegger [last week] signed several bills meant to curb lending abuses, including SB 94, which prohibits anyone from taking an advance fee for help getting a loan modification.

• AG Brown said [...] in a release, “Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure. The loophole that allowed this abusive practice to continue has now been closed, and homeowners should avoid any person charging up-front fees for foreclosure relief services.”

• Anyone who violates the ban can be fined up to $10,000 and imprisoned for up to one year. Corporations can be fined up to $50,000.

For more, see AG Brown to enforce ban on advance fees for mortgage aid.

For AG Brown's press release, see Brown Alerts Homeowners that New Law Prohibits Up-front Fees for Foreclosure Relief Services.

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In a related story, see The Recorder: Lawyers Vexed by New Law Barring Upfront Fees for Mortgage Modification Work:

• [R]eal estate attorneys say the new rules have created a host of unanswered questions. Can a firm accept a litigation retainer and later secure an unanticipated loan modification? Can lawyers place fees in a trust and draw on them when they finish the work? [...] Bar spokeswoman Diane Curtis said Bar attorneys are working on a document that will answer members' questions about the new law. The law calls for violators to face Bar discipline.