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CIVIL
CODE
SECTION 2945-2945.11 |
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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 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) 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 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," 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.
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