Foreclosure Consultant - Can A Real Estate Agent Be One?

 

I receive daily calls from our members wanting to know whether or not real estate agents can assist clients with loan modifications and charge the client separately for it. The answer is, "Yes and no".

 

Foreclosure Consultants Doing Loan Modifications

. The 2007 Legislative Session added provisions to the law describing and defining "foreclosure consultants", "foreclosure purchasers" and "foreclosure reconveyances", among other things. The new law is contained in Nevada Revised Statutes Chapter 645F at 645F.300 through 645F.450. The parameters under which a person may provide foreclosure and loan modification services are:

NRS 645F.320 "Foreclosure consultant" defined.

"Foreclosure consultant" means a person who, directly or indirectly, makes any solicitation, representation or offer to a homeowner to perform for compensation, or who, for compensation, performs any covered service that the person represents will do any of the following:

1. Prevent or postpone a foreclosure sale;

2. Obtain any forbearance from any mortgagee or beneficiary of a deed of trust;

3. Assist the homeowner to exercise the right of reinstatement provided in the legal documents;

4. Obtain any extension of the period within which the homeowner may reinstate the homeowner's obligation;

5. Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a residence in foreclosure or included in the mortgage or deed of trust;

6. Assist the homeowner in foreclosure or loan default to obtain a loan or advance of money;

7. Avoid or ameliorate the impairment of the homeowner's credit resulting from the recording of a notice of default or the conduct of a foreclosure sale;

8. Save the homeowner's residence from foreclosure; or

9. Assist the homeowner to obtain a foreclosure reconveyance.

(Added to NRS by 2007, 2854)

NRS 645F.310 "Covered service" defined.

"Covered service" includes, without limitation:

1. Financial counseling, including, without limitation, debt counseling and budget counseling.

2. Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a mortgage or other lien on a residence in foreclosure.

3. Contacting a creditor on behalf of a homeowner. [note: this may include loan modifications].

4. Arranging or attempting to arrange for an extension of the period within which a homeowner may cure his default and reinstate his obligation pursuant to a note, mortgage or deed of trust.

5. Arranging or attempting to arrange for any delay or postponement of the time of a foreclosure sale.

6. Advising the filing of any document or assisting in any manner in the preparation of any document for filing with a bankruptcy court.

7. Giving any advice, explanation or instruction to a homeowner which in any manner relates to the cure of a default in or the reinstatement of an obligation secured by a mortgage or other lien on the residence in foreclosure, the full satisfaction of the obligation, or the postponement or avoidance of a foreclosure sale.

(Added to NRS by 2007, 2854)

So, the answer is "yes", an agent can assist a client in negotiating a loan modification. However, the answer is "no" he/she cannot do this using his/her real estate license. 760 Margrave Drive, Suite 200 • Reno, NV 89502 • Toll free  800-748-5526  • Office  775-829-5911  • Fax 775-829-5915 • nvar.org . The Mortgage Lending Division (MLD) has published a newsletter describing what a foreclosure consultant can and cannot do. See newsletter at http://www.mld.nv.gov/Documents/2008-10-06-Foreclosure_Consultants.pdf.

 

Separate Business

The MLD article warns, "While licensees can become foreclosure consultants or foreclosure purchasers without any new Division license or approval, they cannot act as such within the scope of their existing licenses. ...Persons licensed under any of these provisions wishing to conduct foreclosure or credit counseling activities for fees would need to conduct these activities outside of their current licenses." [Emphasis added].

Therefore, it is extremely important for a real estate agent doing the job of a foreclosure consultant to disclose to the homeowner that he/she is NOT acting under his/her real estate license. He/she must make it clear to the client what services he/she is rendering as a foreclosure consultant and that it is not part of real estate services or under his/her real estate license. A foreclosure consultant must have separate business cards. He/she must advertise separately from his/her real estate business. He/she cannot advertise using the real estate broker's logo or address. He must treat the foreclosure consultant business as a separate business.

It is equally important that the real estate agent inform his/her real estate broker that he/she is acting as a foreclosure consultant as a side business. Brokers are advised to make specific in-house rules about agents acting as foreclosure consultants.

Prohibitions

. WARNING: NRS 645F.430 provides a criminal penalty of up to 1 year in prison for fraud or deceit against a homeowner. The Mortgage Lending Commissioner may impose an administrative penalty of up to $10,000 per violation of the foreclosure consultant law.

An existing Division license may be impacted by any conduct that constitutes fraud or misrepresentation, a lack of moral turpitude, or which is otherwise unsafe or injurious.

Certain acts are prohibited for a foreclosure consultant which may not be prohibited for a real estate agent. Therefore, it is important for an agent who is performing foreclosure consultant activities to know what acts consultants are prohibited from performing. A foreclosure consultant:

􀂾 shall not collect or receive any compensation until after the foreclosure consultant has fully performed each service that he/she contracted to perform or represented he/she would perform,

􀂾 may not collect fees unless they are fully disclosed,

􀂾 may not take any wage assignment for payment,

􀂾 may not receive any consideration from any third party,

􀂾 may not acquire an interest in the residence in foreclosure,

􀂾 may not accept a power of attorney from a homeowner except to inspect documents.

760 Margrave Drive, Suite 200 • Reno, NV 89502 • Toll free  800-748-5526  • Office  775-829-5911  • Fax 775-829-5915 • nvar.org . There is, also, the issue of competence. A real estate agent must advise the client to obtain advice from an expert relating to matters which are beyond the expertise of the licensee. In other words, a real estate agent must advise his client to seek the help of a competent person to negotiate the loan modifications. If the agent him/herself is not competent, he/she must recommend the client obtain a competent loan modification consultant.

 

Competence

A real estate agent may assist a homeowner in foreclosure; but this assistance is outside his realm as a licensed real estate agent. Anyone doing foreclosure consulting must be competent to do so.

Statements made by the NVAR Information Line attorneys on the telephone, in e-mails, or in legal e-news articles are for informational purposes only. NVAR's staff attorneys provide general legal information, not legal representation or advice regarding your real estate related questions. No attorney-client relationship is created by your use of the Legal Information Line and any information you receive. You should not act upon this information without seeking independent legal counsel. Information given over the Legal Information Line or in these articles is for your benefit only. Do not practice law! Inform your clients they must seek their own legal advice.

760 Margrave Drive, Suite 200 • Reno, NV 89502 • Toll free  800-748-5526  • Office  775-829-5911  • Fax 775-829-5915 • Sue Saunders, NVAR General Counsel