My personal opinion on a loan modification

Real Estate Agent with Coldwell Banker Los Gatos

DISCLAIMER: The information contained in this blog is my personal opinion. This information can not be considered as legal or financial advice nor should it be relied upon as legal or financial advice.

written by Daniel Pizano

February 1, 2009

It seems that everywhere you look, someone is doing loan modifications. Investor groups, Brokers, Non-Profit Organizations, and even attorneys are getting in on the act. Is the upfront charge of $1,000, $2,000, $3,000 or even $4500 worth it or not?

It seems that there are many unscrupulous companies out there just pocketing money and not doing anything for the person losing their home. These shameless people prey on the helpless and the unfortunate individuals who are in a bad financial situation and add insult to injury.

According to the DRE's website, The law is very clear when it comes to Licensed Real Estate Brokers helping you with a loan modification. The main thing to remember is that you the homeowner are protected by California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a "foreclosure consultant", as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property.

According to the DRE's website, if a Notice of Default has NOT been recorded against your property, it may be permissible for a real estate broker to assist you in working out a loan modification or otherwise negotiate a possible resolution to your problem with your lender or loan servicer and ask you for payment in advance for their services.

If you are two or three months late you may receive a "Notice of Default." This is an official letter which states that the lender will begin the foreclosure proceeding to get their property back.

In the loan modification world the NOD is important because the law is set up to protect homeowners who are losing their homes from predators looking to "steal" their homes out from under them for pennies on the dollar. I'm just a Real Estate agent and not a lawyer and this is only my opinion. 

The DRE's website information says that If your lender has recorded a notice of default do not pay any advance fees to a real estate licensee, or to any person or entity. California licensed lawyers when rendering services in the course of their legal practice(s) are exempt from this prohibition. There are non-profit agencies that can assist you without charging you a fee and real estate licensees who can represent you for a fee to be paid AFTER they have completed their work.

The DRE goes on to say that California Real Estate Brokers can modify loans and can ask for advanced fees as long as they file an "advanced fee agreement" with the DRE and it is approved (required after the NOD).

According to the DRE, the broker must have you sign an agreement that tells you what services will be performed, when they will be performed and how much you must pay. This has to be clearly stated for you and they have to be specific steps. These brokers then will do the job, get paid for their work, and nothing further needs to be submitted to the DRE. The broker cannot have you sign an agreement until it has been submitted to the Department of Real Estate first for review and the broker has received permission to use it and collect the advance fee.

You don't need an attorney to do the work although the attorney often threatens the bank with Fair Housing, RESPA, and other violations when dealing with banks and get more done in a shorter timeframe than a RE Broker.

If you chose not to work with an attorney and work directly with a Broker, that's fine. However, make sure that you go to the DRE's website and make sure that they are: 1) licensed and 2) Have no complaints against them and 3) If a NOD has been recorded against your property make sure that they are on the DRE's list of approved brokers who have an "advanced fee agreement" filed and ask to physically see the "no objection" letter that they received from the DRE.

Attorneys may say that they have more muscle and have a better shot at getting your loan modified. Brokers may say that the attorneys charge too much and that they can do the same job for less money. Again this is all heresay about selling the advantages of working with either side. The non-profit groups recommended by HUD seem over-burdened with too many people needing help and not enough resources to assist everyone right away.

If someone approaches you about a loan modification, you may want to ask for a reference of a few successful clients.

Also, before you give anyone your money find out if there are any money back guarantees. In the January 30, 2009 email newsletter from the Silicon Valley of Realtors, attorney Edward Lear with the law firm Century Law Group LLP points out that his law firm has mitigated thousands of home foreclosure cases and developed positive working relationships with many lenders.  He goes on to say that their office will tell homeowners upfront if they can do a loan modification or not.  He said the firm will not cash the retainer if it knows it will not be successful.

Before you hire an individual or group you may want to check out any complaints with Consumer Affairs, the Better Business Bureau, The Department of Real Estate and the CA Attorney Generals office. Also, Google their name to see if there are any complaints anywhere on the Internet. This is just common sense kind of stuff.

Before you pay an advance fee to anyone you may want to first call the Department of Real Estate at (916) 227-0770 to find out if an advance fee agreement is on file. You can also go to the DRE's website to verify.

Please read the following disclaimer:

DISCLAIMER: The information contained in this blog is my personal opinion. This information can not be considered as legal or financial advice nor should it be relied upon as legal or financial advice.


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Tracy Royce
Short Sale Arizona, Arizona Short Sale Realtor - Phoenix, AZ
Royce of Real Estate - Short Sale Arizona

Pretty thorough post, thanks for pushing consumer education.

Tracy Venezia-Royce

Live Free Investment Group




Feb 02, 2009 09:04 AM #1
John Sweeps McNulty
Gallagher & Lindsey Realtors - Alameda, CA


Nicely done overview. I have, as a realtor in California and property owner with a 2-year old house now underwater, wanted to have some confidence in anyone who might help me. I am linking below my thoughts in my first blog. 

Two things to add to your writing. 1-You can do this yourself, while current in your payment and while in default. (I don't see that any attorney has shown clear evidence that they really **I mean really** have an inside track or secret phone numbers or attorney clout at getting a better result for a person like me.)

2-Your comment, "I'm just a Real Estate agent and not a lawyer and this is only my opinion." may seem to lead to the conclusion that a lawyer is a better choice than doing this yourself. Well, maybe, but my blog research does not lead me to real evidence that this new business attorneys are switching into is something they have real cred earned and proven.

(I can, today, get a $200 referral fee from a San Diego law firm just for heading a person like me, an under water property owner, when they settle with a lender. So, does that make me want to blindly refer people? No.)

Take a look at

Still, this is good to read and the best I have seen.

John McNulty, Kane & Associates Realtors, Alameda. CA.


Apr 24, 2009 02:56 PM #2
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Dan Pizano

San Jose Realtor Real Estate Agent
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