What if you didn’t have the money to buy Joe’s house (from the earlier hypothetical), but you had a co-worker or friend who did. If you offer up that information to Joe, and he agrees to give you a finders fee–you could be headed down the road to being considered a foreclosure consultant.
California Civil Code Section 2945 defines foreclosure consultants as " 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…" including offering to "Save the owner’s residence from foreclosure."
In fact, the moment Chase records a Notice of Default against Joe’s home, Joe will be bombarded by solicitations of people who claim they can save his equity or otherwise rescue him from foreclosure. Joe would be wise to view these offers with skepticism as fraud is rampant in these situations.
As the California Attorney General was quoted as saying in a consumer lawsuit, ""Consumers facing foreclosure should be wary of companies that solicit them with offers to help them avoid the loss of their home," said Lockyer. "Foreclosure consultants often charge high fees, but take the money and run."
There are very few exemptions in the statute regarding who can profit from assisting homeowners in foreclosure. Attorneys, lenders and junior lienholders are a few. The code mysteriously allows DRE licensees (Realtors TM) to act as foreclosure consultants if they are bonded, but no surety company will write that bond, so it is an illusory exemption.
So as a foreclosure consultant, you can receive compensation from Joe for your services, but you must have a written agreement for those services. The written agreement must contain the language that is in Civil Code 2945, and it must notify the equity seller that he or she has the right to cancel and comply with the all the other restrictions set forth in the statute.
Additionally, the friend that is buying the house from Joe still needs to prepare all the equity purchasing contracts discussed below in conformity with California Civil Code 1695.
The above is not intended to be a primer or "how-to" guide on going into business as a foreclosure consultant. It’s an extremely difficult area and failure to comply with the statute could result in a fine and a criminal penalty. Specifically:
"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."