Loan Modification Checklist
Please provide the documents listed on this checklist. It is necessary for us to obtain complete and
accurate assessment of your current financial situation. MISSING OR INCOMPLETE
IMFORMATION CAN DELAY AND OR AFFECT THE OUTCOME OF THIS REQUEST.
Please allow ample time to process your request with your lender(s). Loan Modification and Loss
Mitigation takes time. At SILVER CREEK REALTY, Our expert Loss Mitigation Specialists are
highly skilled, and with your cooperation, SILVER CREEK REALTY will negotiate and obtain the
best results possible for our client, YOU!
___ HOMEOWNER BAILOUT PROGRAM AGREEMENT
___ CLIENT 3 PARTY AUTHORIZATION FORM – Authorization to negotiate with the Lender
___ FINANCIAL WORKSHEET – Information on the Borrower / Co-Borrower
___ CLIENT INTAKE FORM – Silver Creek Realty to complete after initial consultation.
___ HARDSHIP LETTER / EXPLANATION – Explanation and letter to clarify hardship, such as
current financial hardship details, sufficient means to make modified payments with details
___ PROOF OF INCOME – W-2 employees: (2) most recent pay-stubs. Self-employed: Last
2 years W-2 or 1099’s and Profit and Loss Statement.
___ RECENT PROPERTY TAX BILL
___ RECENT HAZARD INSURANCE BILL (if applicable)
___ MORTGAGE STATEMENTS
___ TAX RETURNS – Provide copies of the past two (2) years income tax returns. Include all
Schedules. For incorporated, self-employed borrowers / co-borrowers we will also need
two (2) most recent corporate returns as well.
___ COPIES OF BANK STATEMENTS / ASSETS – Provide copies of 3 months statements of
all pages for ALL Bank accounts.
___ CORRESPONDENCE – Any notices of default or notices of trustee sale, etc.
In some cases additional or updated information may be requested by your lender(s). Please
provide these additional requested documents to your Counselor in a timely fashion. At SILVER
CREEK REATLY, we strive to do our best to get you back on track and your life back.
Client Signature Date
Client Signature Date
Loan Modification Checklist -1-
HOMEOWNER BAILOUT PROGRAM
(Loan Modification and Foreclosure Prevention Services)
Property Address ______________________________________________
HOMEOWNER ___________________________________, has applied to participate in the SILVER
CREEK REALTY Homeowner Bailout Program. This program is designed to assist
HOMEOWNERS in financial distress. SILVER CREEK REALTY is providing these services to
financial distressed HOMEOWNERS at no charge.
SILVER CREEK REALTY agrees to work diligently on HOMEOWNER’S behalf and to use all
reasonable efforts to obtain a successful result for HOMEOWNER.
SILVER CREEK REALTY agrees to interview the HOMEOWNER, and obtain and review
information about the current loans.
SILVER CREEK REALTY agrees to vigorously seek from the Lender(s) an offer to the
HOMEOWNER of a loan modification which will allow the HOMEOWNER to remain in the property
while making affordable loan payments.
SILVER CREEK REALTY agrees to contact the Lender(s) to discuss and negotiate the loan
modification request(s) and package of supporting documents.
SILVER CREEK REALTY agrees to communicate regularly with Lender(s) to attempt to negotiate
and obtain more favorable loan terms for the HOMEOWNER.
SILVER CREEK REALTY has an in-house attorney to review and assist as necessary.
SILVER CREEK REALTY will assist HOMEOWNER in understanding and evaluating any loan
modification terms that may be offered by the Lender(s)
SILVER CREEK REALTY will, on HOMEOWNER’S behalf, attempt to obtain one or more of the
following types of loan modification offers:
• Change adjustable interest rate to fixed interest rate
• Reduce fixed interest rate
• Reduce principal balance on loan
• Extend term of loan
• Add any past due amounts to principal balance
• Reforecast loan term and payments
• Refinance loan
• Discounted payoff demand
• Short Sale approval *
• Deed-in-Lieu *
* Acceptance of these offers from Lender would involve HOMEOWNER ultimately moving out of the property and
depending on HOMEOWNER’S goals, will only be pursued as a last resort once other options for HOMEOWNER
remaining in the property have been exhausted.
Homeowner Bailout Program Agreement -1–
HOMEOWNER agrees to complete the provided financial worksheet as soon as possible. In addition,
HOMEOWNER must provide SILVER CREEK REALTY with the following:
• Hardship Letter from HOMEOWNER
• Completed Financial Worksheet
• Last 3 Months Bank Statements
• Last 2 W-2’s or 1099’s
• If Self Employed – Last 2 Years Profit & Loss Statements
• Last 2 Years Tax Returns
• 2 Most Recent Mortgage Statements on all loans
• Recent Property Tax Bill
• Recent Hazard Insurance Bill (if applicable)
• Last 2 pay period pay stubs
• Any correspondence to or from Lender(s)
HOMEOWNER agrees to cooperate fully with SILVER CREEK REALTY and all of its agents and
employees. HOMEOWNER agrees to promptly provide all information and supplemental information
requested by SILVER CREEK REALTY or the Lender(s)
HOMEOWNER acknowledges that they have NOT been advised to stop making payments on the
property. HOMEOWNER has NOT been advised to stop making property tax, insurance, or
homeowner association payments on the property.
HOMEOWNER agrees to keep SILVER CREEK REALTY advised of any address, phone # or other
contact information changes.
HOMEOWNER understands that SILVER CREEK REALTY’S Homeowner Bailout Program
provides loan modification services for free to financially distressed homeowners. These free services
are limited in scope to loan modification negotiations. Any additional services, including any services
provided in the context of a real estate sales transaction, including a short sale, are subject to a separate
negotiation for any fees charged.
HOMEOWNER acknowledges being advised that when negotiating a loan modification or other
foreclosure prevention strategy, no particular outcome can be guaranteed. Each situation, each
HOMEOWNER, each Lender, and each property present a different and unique set of circumstances.
Lenders have no obligation to modify the terms of the loan and may not agree to make any changes or
may agree to make changes that are insufficient to help HOMEOWNER stay in the property.
This package of documents does not take the place of legal or tax advice in a particular case. If
HOMEOWNER has a specific legal question regarding the loan modification, they are encouraged to
contact SILVER CREEK REALTY’S in-house counsel in writing . HOMEOWNER is advised that if
they have any tax related questions, SILVER CREEK REALTY is not providing any tax advice and
the HOMEOWNER is encouraged to contact a tax professional.
Homeowner Bailout Program Agreement -2–
TO NEGOTIATE WITH LENDER
____________________ hereby give ______________________
Permission to discuss any and all information regarding:
Loan # _________________________ Address _________________________
On my behalf, with ____________________of Silver Creek Realty, my Realtor.
I also understand that Silver Creek Realty has made no guarantees or promises as
to the outcome of this agreement and that Silver Creek Realty is acting solely as
the Realtor and in no way has ownership or title to the above-mentioned property.
Obtaining this information will help avoid the foreclosure process.
Client / Owner Client / Owner
Social Security # Social Security #
3rd Party Authorization -1–
PERSONAL FINANCIAL WORKSHEET
The following information you provide will remain confidential.
You must give us complete information to enable us to evaluate your request.
Subject Property Address: _____________________________________________________
First Mortgage: ______________________ Loan #: ______________________________
Second Mortgage: ____________________ Loan #: ______________________________
BORROWER Name: ________________________________________________________________________
Home Phone #: ___________________________ Alt Phone #: __________________________________
Present Employer: __________________________________________________________________________
Employer Phone #: ________________________ Employer Fax #:_______________________________
Employer Address: _________________________________________________________________________
CO-BORROWER Name: ____________________________________________________________________
Home Phone #: ___________________________ Alt Phone #:__________________________________
Co-Borrower’s Present Employer: _____________________________________________________________
Employer Phone #:_________________________ Employer Fax #:______________________________
Employer Address: _________________________________________________________________________
Number of Children & Ages: _________________________________________________________________
NET MONTHLY INCOME
BORROWER Base Income...$_______________ CO-BORROWER Base Income….$ ______________
TOTAL INCOME………….$_______________ TOTAL INCOME…………….....$_______________
ASSETS (For real estate owned other than subject property, enter current market value)
Bank Accounts.……..….$______________ Personal Property………..$______________
Stocks/Bonds.………….$______________ Auto # 1………………....$______________
Life Insurance.………....$______________ Auto #2……………….…$______________
Real Estate……………..$______________ Other…………………….$______________
OTHER MONTHLY INCOME
Mortgagee Name(s): BORROWER: ____________________CO-BORROWER: _____________________
Credit Card #1…………………………….................$_________...........................$_________
Credit Card #2…………………………….................$_________...........................$_________
Credit Card #3……………………………………....$_________............................$_________
Property listed for sale: __________________________________________________________________
Agent Name: _______________________________ Company: __________________________
Agent Phone #: _____________________________ Agent Fax #:_________________________
BORROWER SIGNATURE Date CO-BORROWER SIGNATURE Date
CLIENT INTAKE FORM
Property Address: _____________________________________________________________________________
Client Name: ___________________________________ Co - Client Name: ____________________________
Social Sec #: ___________________________________ Social Sec #: ________________________________
Phone #: __________________ Cell #: _____________ Phone #: ________________ Cell #: ____________
Email: ________________________________________ Email: _____________________________________
# of Children: ___________________________________ Purchased as Owner/Occupied? Yes No
Is this principal residence? Yes No Property Rented? Yes No
Other Encumbrances on Property? Yes No Status of Tenant? ____________________________
1st Lender: ____________________________________ 2nd Lender: ________________________________
Loan #: _______________________________________ Loan #: ____________________________________
Phone #: ______________________________________ Phone #: ___________________________________
Fax #: ________________________________________ Fax #: _____________________________________
Assigned Negotiator: ____________________________ Assigned Negotiator: _________________________
Principal Balance: ______________________________ Principal Balance: ___________________________
Monthly Payment: ______________ Int. Rate: _______ Monthly Payment: ______________ Int. Rate: _____
3 Party Autho Faxed: __________ Rec’d: _________ 3 Party Autho Faxed: __________ Rec’d: _______
Date of Last Payment Made: _____________________ Date of Last Payment Made: ___________________
Total Monthly Income (inclusive):__________________ Total Monthly Out-go (inclusive): ________________
Brief Description of Hardship: ________________________________________________________________________
Client Goal: ______________________________________________________________________________________
Client Intake Form -1–
This is a change in loan terms to the consumer’s benefit.
Some sub-prime loans start out at an affordable interest rate and then, like a time bomb, burst upward to the
point that the monthly payment as much as doubles. If the homeowner can’t make the payments at the
higher rate, the lender might lower the interest rate for a limited time.
For example, if your rate jumped up to 8%, the bank might consider lowering it to 6% or less for the next five
year. In some cases, the modified rate starts especially low, then grows in steps during the modification
Modifications or reductions to principal are extremely rare.
This is a temporary suspension of payments. This sometimes is offered if a borrower has lost a job but has
a new one starting in the near future. Or perhaps there was a temporary cash shortage because of medical
bills or other matters.
Forbearance usually lasts just a few months. Then the bank wants payments to resume and the missed
payments made up.
This is a blueprint for making up missed payments, usually over time. For example, if your mortgage
payment is $2,000 a month and you miss three months to put you $6,000 in arrears, a repayment plan might
allow you to make up the missed payments over a year. In that case, the minimum monthly payment would
be $2,500 for a year ($500 added each month over 12 months or $500 x 12 = $6,000).
You can tell it to a judge. This is one of the few ways to get the principal of the loan reduced, but it’s
probably not going to happen without a fight. Such a reduction sometimes is granted by a court or in a
settlement because something illegal happened during the lending process.
In some cases, the annual percentage rate – better known as the APR – wasn’t disclosed in subprime loans,
perhaps because it was so appallingly high. Or some misrepresentation was made to the borrower.
In the midst of your foreclosure troubles, kindly people might appear – at your doorstep, church or tennis
club – with a plan to make your troubles disappear. But it could be a scam.
Steer clear of anyone who:
Guarantees to stop the foreclosure process;
Collects upfront fees;
Asks to be paid by wire or cashier’s check;
Instructs you not to contact your lender or lawyer;
Wants you to make mortgage payments directly to him or her;
Suggest you sign over or “share” your property deed or title;
Proposes a lease-and-buyback arrangement;
Offers to fill out paperwork for you; or
Pressures you to sign documents you don’t understand.
Information: www.ftc.gov/menus/consumer/credit.shtm. Click on “Mortgages / Real Estate,” then
“Foreclosure Rescue Scams.”
___________________________ _____________ __________________________ ______________
Seller / Owner Date Seller / Owner Date
Excerpted from an article by David Colker of the Los Angeles Times – February 15, 2009
Foreclosure Information Sheet
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation – From
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the
discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as
well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of
forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion
does not apply if the discharge is due to services performed for the lender or any other reason not
directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts,
Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.
The following are the most commonly asked questions and answers about The Mortgage
Forgiveness Debt Relief Act and debt cancellation:
What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt,
you may have to include the cancelled amount in income for tax purposes, depending on the
circumstances. When you borrowed the money you were not required to include the loan
proceeds in income because you had an obligation to repay the lender. When that obligation is
subsequently forgiven, the amount you received as loan proceeds is normally reportable as
income because you no longer have an obligation to repay the lender. The lender is usually
required to report the amount of the canceled debt to you and the IRS on a Form 1099-C,
Cancellation of Debt.
Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back
$2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of
debt of $8,000, which generally is taxable income to you.
Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt
income is not taxable involve:
• Qualified principal residence indebtedness: This is the exception created by the Mortgage
Debt Relief Act of 2007 and applies to most homeowners.
• Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
• Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled
debt may not be taxable to you. You are insolvent when your total debts are more than
the fair market value of your total assets.
Mortgage Debt Relief Act Info -1–
• Certain farm debts: If you incurred the debt directly in operation of a farm, more than half
your income from the prior three years was from farming, and the loan was owed to a
person or agency regularly engaged in lending, your cancelled debt is generally not
considered taxable income.
• Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in
case of default is to repossess the property being financed or used as collateral. That is,
the lender cannot pursue you personally in case of default. Forgiveness of a non-
• recourse loan resulting from a foreclosure does not result in cancellation of debt income.
However, it may result in other tax consequences.
These exceptions are discussed in detail in Publication 4681.
What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see
News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of
modification of the terms of the mortgage, or foreclosure on your principal residence.
What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax
return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain
cancelled debt on your principal residence from income. Debt reduced through mortgage
restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the
Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve
your principal residence, or to refinance debt incurred for those purposes. In addition, the debt
must be secured by the home. This is known as qualified principal residence indebtedness. The
maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1
million if married filing
Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the
principal balance of the old mortgage, immediately before the refinancing, would have qualified.
For more information, including an example, see Publication 4681.
How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through
Is there a limit on the amount of forgiven qualified principal residence indebtedness that
can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million
($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the
balance was greater, see the instructions to Form 982 and the detailed example in Publication
Mortgage Debt Relief Act Info -2–
If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached
to your tax return.
Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082
Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of
qualified principal residence indebtedness. If you are using the form only to report the exclusion
of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your
principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home
and modification of the terms of your mortgage resulted in the forgiveness of qualified principal
residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.
Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also
download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days
How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount
of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence
indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2
and 10b, if applicable, on Form 982.
Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal
residence or refinance debt incurred for those purposes qualifies for this exclusion. See
Publication 4681 for further details.
If part of the forgiven debt doesn't qualify for exclusion from income under this provision,
is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not
required to include forgiven debts in income to the extent that you are insolvent. You are
insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify
for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is
qualified farm indebtedness or qualified real property business indebtedness. If you believe you
qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses
each of these exceptions and includes examples.
I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.
If I sold my home at a loss and the remaining loan is forgiven, does this constitute a
cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the
unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or
canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt,
showing the amount of debt canceled. However, you may be able to exclude part or all of this
income if the debt was qualified principal residence indebtedness, you were insolvent
immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An
exclusion is also available for the cancellation of certain nonbusiness debts of a qualified
individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.
Mortgage Debt Relief Act Info -3–
If the remaining balance owed on my mortgage loan that I was personally liable for was
canceled after my foreclosure, may I still exclude the canceled debt from income under the
qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example
2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and
Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any
debt of $600 or more. The amount cancelled will be in box 2 of the form.
What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form
How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to
Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge
of indebtedness and enter the amount of the discharged debt excluded from gross income on line
2. Any remaining canceled debt must be included as income on your tax return.
(2) File Form 982 with your tax return.
My student loan was cancelled; will this result in taxable income?
In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed
to a loan provision requiring you to work in a certain profession for a specified period of time, and
you fulfilled this obligation.
Are there other conditions I should know about to exclude the cancellation of student
Yes, your student loan must have been made by:
(a) the federal government, or a state or local government or subdivision;
(b) a tax-exempt public benefit corporation which has control of a state, county or municipal
hospital where the employees are considered public employees; or
(c) a school which has a program to encourage students to work in underserved occupations or
areas, and has an agreement with one of the above to fund the program, under the direction of a
governmental unit or a charitable or educational organization.
Can I exclude cancellation of credit card debt?
In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from
income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you
were insolvent just before the cancellation. See the examples in Publication 4681.
How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your
assets. Assets include everything you own, e.g., your car, house, condominium,
furniture, life insurance policies, stocks, other investments, or your pension and other
Mortgage Debt Relief Act Info -4–
How should I report the information and items needed to prove insolvency?
Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and
Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you
were insolvent immediately before the cancellation. You were insolvent to the extent that
your liabilities exceeded the fair market value of your assets immediately before the
To claim this exclusion, you must attach Form 982 to your federal income tax return.
Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt
canceled or the amount by which you were insolvent immediately prior to the
cancellation. You must also reduce your tax attributes in Part II of Form 982.
My car was repossessed and I received a 1099-C; can I exclude this amount on my tax
Only if the cancellation happened in a title 11 bankruptcy case, or to the extent you were
insolvent just before the cancellation. See Publication 4681 for examples.
Are there any publications I can read for more information?
(1) Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments
(for Individuals) is new and addresses in a single document the tax consequences of
cancellation of debt issues.
(2) See the IRS news release IR-2008-17 with additional questions and answers on
Mortgage Debt Relief Act Info -5–
Consumer Alert - Advance Fees and Loan Modification Services
If you are behind in your mortgage payments, you may be contacted by individuals or companies
that will offer to help you work out a loan modification with your lender or provide other services to
you in order to help you prevent a foreclosure on your home.
You must be very careful if you are asked to pay for any of these services in advance, whether in
cash, check or by charging your credit card. First, 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. If your lender has
recorded a notice of default, do not pay an advance fee 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. For information on non-profit
housing counseling services, use the following links:
• Federal Housing Administration – www.fha.gov
• Hope Alliance Web site – www.995hope.org
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. However, 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. The
broker cannot have you sign an agreement until it has been submitted to the Department of Real
Estate for review and the broker has received permission to use it and collect the advance fee.
The following individual and corporate real estate brokers have submitted advance fee
agreements for loan modification and/or similar services to the Department of Real Estate for
review, and have received “no objection” letters regarding their use. You can obtain information
on brokers and their locations by clicking on the “License Number” on the listing below or call
• Advance Fee Agreement Listing – www.dre.ca.gov/mlb_adv_fees_list.html
The Department of Real Estate does not approve, endorse, recommend or make any
representations about any of the agreements or their terms, or any aspect of a licensee’s
business activities. Consumers wishing to contract with a real estate broker for loan
modification or any other similar or related services should carefully review the
agreement(s) and consider obtaining independent advice before signing an agreement(s)
Consumer Alert – Advance Fees -1–
or advancing any fees. Consumers should also consider comparing the services and fees
offered by other licensed brokers on the list.
Note: Licensed real estate brokers who provide loan modification or similar services without
collecting fees in advance are not required to receive the Department of Real Estate’s permission
as long as their services are fully completed before you pay them.
The list is updated on a periodic basis and may not include those which have recently completed
the review process.
For more information please go to www.dre.ca.gov.
Consumer Alert – Advance Fees -2–
Bar issues foreclosure ethics alert
By Nancy McCarthy
When San Diego attorney Carol S. was asked recently if she wanted to associate with a firm
offering foreclosure modification services, she saw red flags. At a meeting with an intermediary
who had approached her firm, she expressed concern about potential ethical constraints, such as
splitting fees with non-lawyers and soliciting clients, but “they tried to explain some easy
Just three years out of law school, Carol (not her real name) said she has heavy student loan
debt and the risk seemed too great. After consulting with both the Department of Real Estate and
the State Bar’s Ethics Hotline, she decided to forget it.
“These places are largely unregulated,” she said. “But I think it would be impossible to live up to
your ethical obligations.”
Carol is not the only lawyer who’s worried about working with foreclosure consultants or loan
modification operations that have developed in response to the collapse of the housing market.
Indeed, so many have contacted the State Bar for ethics advice that its professional responsibility
committee issued an alert last month offering guidance to lawyers thinking about signing up. “The
most important thing is for lawyers to understand this area is fraught with danger from an ethics
point of view,” said Jon Rewinski, a Los Angeles litigator who drafted the ethics alert.
California law specifically addresses foreclosure consultants and restricts their activities; among
other things, they are prohibited from collecting upfront fees for their work. However, because
attorneys are permitted to accept advance fees, they are in demand by some loan modification
businesses. (Licensed brokers also may accept advance fees under certain circumstances.)
According to the alert, posted on the State Bar’s home page (calbar.ca.gov), “There is evidence
that foreclosure consultants may be attempting to avoid the statutory prohibition on collecting a
fee before any services have been rendered by having a lawyer work with them in foreclosure
The alert goes on to list a series of ethics rules prohibiting lawyers from:
• paying a referral or marketing fee to a foreclosure consultant or other person for referring
distressed homeowners to the lawyer;
• directly or indirectly splitting fees earned from a distressed homeowner client with the
foreclosure consultant or any other non-lawyer;
• aiding a foreclosure consultant or anyone else in the unauthorized practice of law or
forming a partnership or joint venture with a foreclosure consultant or other non-lawyer if
any of its activities would involve providing legal services;
• contacting in person or by telephone a distressed homeowner referred by a foreclosure
consultant or someone else unless the lawyer has a family or prior professional
relationship with the homeowner;
• filing a lawsuit without good cause or motions in a lawsuit that are simply intended to
delay or impede a foreclosure sale; and
• failing to perform legal services with competence.
The alert also describes a series of scenarios that may land lawyers in legal hot water. For
example, a non-lawyer may offer a large number of referrals and a promise of easy money; may
request that the lawyer pay a referral or marketing fee; or may ask a lawyer to enter into a joint
venture with a distressed homeowner and the consultant. Much of this conduct violates the Rules
of Professional Conduct, the alert warns.
The bar’s Ethics Hotline, a free confidential research service for attorneys, has been receiving
between one and two dozen calls a day for the last six months dealing with the residential
mortgage crisis and loan modification — about 15 to 25 percent of its daily call volume.
Scott Drexel, the bar’s chief prosecutor, says that for the last three months, the bar has received
50 complaints each day — about 950 complaints a month — about lawyers involved in some way
with the foreclosure crisis. While the complaints run the gamut, Drexel said the most common
concerns lawyers who lend their name to a loan modification operation but non-lawyers do most
of the work. The non-lawyers get fees upfront through the lawyer and either do not complete the
modification or do it incompetently. As a result, he said, the client loses his or her money.
Calling the number of complaints “shockingly high,” Drexel said his office is “quite concerned.
We’re especially concerned with attorneys allowing their names to be used by non-attorneys in
some of these loan modification schemes or scams.”
The Department of Real Estate reports complaints about lawyers involved in loan modification
programs who act as fronts or work inhouse. “We’re not certain if they are practicing law or just
lending their names,” said chief counsel Wayne Bell.
The department has no jurisdiction over lawyers but can issue desist and refrain orders against
unlicensed people who operate as real estate licensees and against licensees who violate real
A licensee can collect advance fees before a notice of default is recorded if he or she has
received a “no object” letter from the DRE. Such a letter is issued after a licensee submits an
advance fee agreement, accounting format and any advertising or promotional materials for
review. But the letter does not mean the department endorses a particular service.
The Department of Real Estate also has posted a consumer alert on its Web site (dre.ca.gov)
warning homeowners to beware of individuals or companies that offer to help work out a loan
modification with lenders or provide other services that protect against foreclosure. The
department is part of task forces operating in northern and southern California with county, state
and federal prosecutors looking at loan modification efforts that cross the line into foreclosure
Rewinski said the bar’s alert is not meant to suggest that distressed homeowners are not entitled
to legal counsel; on the contrary, they may well need legal help and lawyers should be able to
assist them. “Distressed homeowners should seek legal advice as one of their options,” he said.
“There are pro bono resources and, of course, lawyers who will help on a paid basis.”
Bell agreed that many lawyers are legitimately helping clients with foreclosure and other credit
issues. “If they are helping a client, engaged in providing professional services, that’s within their
purview,” he said. “If they’re accepting fees and sharing those moneys with non-lawyers, you
have all the problems this ethics alert deals with.” The main questions, he added, are “Is the
lawyer really lawyering, is the lawyer bringing his or her professional skills and abilities to assist
the client, and are they actually having face-to-face meetings with clients?”
Bell said when consumers who are in desperate financial straits see the word lawyer, “they
somehow believe they’re going to get a higher level of care.” For the lawyer, he added, “the
question becomes, if I lend my name to loan modification company, am I adding any value?”
Beware the loan modification merry-go-round
Posted: Friday, March 6 2009 at 05:00 am CT by Bob Sullivan
There’s been a lot of talk lately about loan modifications for homeowners facing foreclosure, a
discussion that reached a crescendo on Wednesday when the White House announced details of
its “Making Home Affordable” plans.
A woman I’ll call Mags (we’re preserving her anonymity) had heard the talk too. The suburban
Virginia woman in her 60s is homebound, recovering from ankle surgery. Her husband has
recently declared bankruptcy. Three months ago, she started contacting her lender to ask for
help. She ran into a wall of busy signals and vague answers. So when she heard about a private
company that said it could help work with her bank to modify her loan and save her home, she
began to investigate. That’s how she landed in my inbox.
"How can we tell that this company is legitimate, will do what they say they will?" she asked. "We
desperately want to modify our mortgage, but we don't want to be stupid!”
There was a red flag right away. Mags said the company wanted a $3,000 up-front payment.
I e-mailed Mags that day to ask her what this firm would do that she couldn't do for herself. She
didn't write back. A few days later, I called. That morning, she'd sent the company a check for
$2,881. And she was very sure she'd done the right thing. She’d checked the company out at the
Better Business Bureau and there were no complaints. The employees sounded very competent,
she said, and the company was advertising on television. I asked her if she'd seen advice on
various Web sites telling consumers not to pay up-front fees for loan modifications. She said she
had, and she'd asked the company about this.
"They said, 'Has anything else you've done so far worked?"
I talked to Mags about how to get free loan modification help, through the list of approved housing
counselors on the U.S. Department of Housing and Urban Development’s Web site. I sent her a
link to HUD’s “find a counselor” Web page. She said she’d already been to the site, but didn’t find
what she was looking for there.
“There are so many different agencies listed, how do you choose?” she asked, noting that about
three dozen are listed in Virginia. “Are they all free? How can you tell?”
In the end she said she relied on the personal recommendation of a co-worker who had also
signed up with the for-profit company.
Within minutes, Mags politely thanked me, rushed me off the phone and then didn’t respond to
my additional e-mails. I had the sick feeling she wouldn't get anything for her $2,881, but for
some reason the modification company was more persuasive than I was. She was willing to pay
for something that should be free.
So I went back to the HUD site and looked up the counselor that was geographically closest to
Mags. When I called, the phone went unanswered. There wasn't even an answering machine to
leave a message, and an e-mail got no response.
Government efforts so far to help out troubled homeowners have been equally ineffectual. The
Hope for Homeowners alliance program announced last year with great fanfare has so far only
helped a few hundred mortgage holders.
It’s no wonder Mags would turn to a company that promised immediate assistance. In fact,
swarms of for-profit companies are advertising loan modification help right now. They are
succeeding because consumers still don’t really know where to turn, said Seattle-based mortgage
fraud expert Richard Hagar.
"They are filling in where our government is failing," he said. "The government says go get a
housing counselor, but when you make a call there is not always somebody there."
Many consumers have hit similar brick walls when dealing with lenders, Hagar said, creating an
ideal opportunity for loan modification con artists.
At the unveiling of the White House loan modification program on Wednesday, officials reiterated
that consumers don’t have to pay for mortgage help. Still, the pitches by for-profit firms can be
very powerful, Hagar said.
"They say they have special phone numbers and can get you help right away," he said.
The problem for people like Mags is that criminals and government-backed counselors can look
identical to consumers who need help. The organizations listed on HUDs Web site – with names
like Consumer Credit Counseling Services – seem indistinguishable from for-profit firms at first
"Whether it's a scam or it's legitimate, it all starts off the same way," he said.
Mortgage brokers piling in
To some struggling homeowners, the salesman behind the mortgage modification sales pitch
might sound familiar, says Curtis Novy, a California-based mortgage broker who is also an expert
on mortgage fraud. He said many of his former colleagues are trying to make a quick buck in the
loan modification market.
"A lot of former subprime loan officers have discovered all this is a money maker," he said. “They
made money selling mortgages people couldn’t afford and are now making money modifying
One online advertisement targeting real estate professionals recently viewed by msnbc.com
promises mortgage brokers a healthy new revenue stream if they attend a class and learn loan
"It just makes sense that you learn how to do loan modifications. A certain percent of the sellers
you are coming across will qualify for a loan modification and you should be the one providing this
service (and earning a fee for doing it)," it said.
Tanisha Warner, a spokeswoman for the Consumer Counseling Credit Services, she said she
hears about consumers paying for modification help all the time.
"When people find their backs are against the wall, they are willing to believe that someone is
going to help them,” she said, while stressing that her firm’s mortgage assistance services are
Not all for-pay loan help services are scams, though, so it’s hard to give blanket advice, Hagar
said. Many consumers find it necessary to pay a lawyer to work out a complicated loan
restructuring, for example, and there’s nothing wrong with paying a lawyer an up-front fee. Hagar
said he’s also seen some legitimate services that charge a small up-front fee, and ask for larger
payment upon the completion of a successful modification. As a rough guideline, he said,
consumers should not pay more than a few hundred dollars up front, unless they are dealing with
Some government regulators have begun to take notice of potentially misleading modification
services. In February, Connecticut Attorney General Richard Blumenthal announced his office
was investigating a company named H.O.P.E. Alliance after it allegedly asked for $1,500 in up-
front payments from consumers. In order to afford the fee payment, the firm told customers to
stop paying their mortgage, he said. The firm’s name also deceptively mimics the name of the
government-backed, nonprofit modification effort, Blumenthal alleges.
On the Web site announcing the new White House loan aid plan – FinancialStability.Gov –
federal officials also make clear that up-front payments are not necessary to get help.
"Beware of any person or organization that asks you to pay a fee in exchange for housing
counseling services or modification of a delinquent loan. Do not pay – walk away!” it reads.
Still, that message hasn’t gotten through to consumers like Mags. And when HUD’s Web site lists
phone numbers that go unanswered and banks give consumers the runaround, it’s no wonder
troubled homeowners are tempted to pay when they finally find someone who will answer the
As federal officials continue to create programs to help troubled homeowners, they should be
sure their marketing plans are at least as extensive as those designed by con artists. HUDs
counselors should be the first link that lands in a Google search, for example. Public service
announcements from the president telling consumers where to get free help wouldn’t hurt either.
RED TAPE WRESTLING TIPS
There is no reason to pay for mortgage help. When trying to get a HUD-approved counselor,
persistence will pay off. Visit the HUD Web site and try several phone numbers until you reach
someone who sounds genuinely interested in helping. Msnbc.com reached a counselor on our
Beginning this week, you can test your eligibility for a government-backed loan modification at the
Financial Stability Web site.
If you are tempted to pay someone, don’t do so until you get results. You wouldn’t pay for auto
repairs or a home remodel until the work is done, so why pay a mortgage modification company?
As a rough guideline, Hagar said, consumers should not pay more than a few hundred dollars up
front unless they are dealing with a lawyer.
People facing mortgage problems often are embarrassed and try to deal with them privately. If
anyone in your family might be in trouble, don’t be shy. Recommend they visit the HUD Web site
– take them to a computer and show them the site if need be. HUD counselors can offer a variety
of solutions to consumers. Warner said a surprising number of consumers are able to refinance
and avoid foreclosure, thanks to new government-backed programs.