With the large influx of short sale transactions coming across our desks, we are reminded to be careful in just how far we go to get the deal to the table.
I learned just last week that Maryland has a specific provision in its Credit Services Business Act that mandates licensing for those who are negotiating a short sale on behalf of seller.
The specific provison speaks in broad terms, but I have been advised that it definately covers short sale negotiators. I am also advised that there are no exemptions in the Act for title agents or real estate agents. Part of the act states as follows:
Businesses which provide loss mitigation consulting, foreclosure prevention, mortgage loan modification, and/or similar services likely will be subject to the MCSBA. As the services provided by these businesses typically include the possibility of deferral of payment on consumers' mortgage loans, these businesses often will come under the definition of "credit services businesses" under the MCSBA. As such, they are required to be licensed as credit services businesses ("CSBs"), and they are subject to various investigatory, enforcement, and penalty provisions as licensees.
I have never knowingly violated this act, but because it is so broad, I wonder just what the limitations are.
This Act seeks to protect consumers from those who may want to take advantage of others by requiring licensing for those who are seeking to assist consumers in their efforts to stave off foreclosure.
I don't know exactly what the requirements are for obtaining the license, but this broad language certainly makes you realize that you may have inadvertenly been acting as a defined foreclosure consultant without even realizing it.
Who is a "Foreclosure Consultant"?
If a person offers the services described below to a mortgage borrower who is at least sixty days in default, it is likely that the person will be a "foreclosure consultant" under PHIFA.6 Thus a homeowner need not be in foreclosure for PHIFA to apply.
- "Foreclosure consultant" is defined under PHIFA as a person who:
- Solicits or contacts a homeowner in writing, in person, or through any electronic or telecommunications medium and directly or indirectly makes a representation or offer to perform any service involving any of the following:
- Stopping, enjoining, delaying, voiding setting aside, annulling, staying, or postponing a foreclosure sale;
- Obtaining forbearance from any servicer, beneficiary, or mortgagee;
- Assisting the homeowner in exercising a right of reinstatement provided in the loan documents, or in refinancing a loan in foreclosure and for which notice of foreclosure proceedings has been published;
- Obtaining an extension of the period within which the homeowner may reinstate the homeowner's obligation or extend the deadline to object to the ratification;
- Obtaining waiver of an acceleration clause contained in the mortgage on a residence in default or in any promissory note or contract secured by the mortgage;
- Assisting the homeowner to obtain a loan or advance of funds;
- Avoiding or ameliorating the impairment of the homeowner's credit resulting from certain events related to the foreclosure;
- Saving the homeowner's residence from foreclosure;
- Purchasing or obtaining an option to purchase the homeowner's residence within 20 days of an advertised or docketed foreclosure sale; or
- Arranging for the homeowner to become a lessee or renter entitled to continue to reside in the homeowner's residence after a sale or transfer; or
- Systematically contacts owners of residences in default to offer foreclosure consulting services
Foreclosure consulting service" includes any of the following:
- 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 default;
- Contacting creditors on behalf of a homeowner;
- Arranging or attempting to arrange for an extension of the period within which a homeowner may cure the homeowner's default and reinstate the homeowner's obligation;
- Arranging or attempting to arrange for any delay or postponement of the sale of a residence in default;
- Arranging or facilitating the purchase of a homeowner's equity of redemption or legal or equitable title.
- Arranging or facilitation the sale of a homeowner's resident or the transfer of legal title, in any form, to another party as an alternative to foreclosure; or
- Arranging for or facilitating a homeowner remaining in the homeowner's residence after a sale or transfer as a tenant, renter, or lessee under terms provided in a written lease.
You can be sure that I will be taking special care not to violate any provisions of this act, and, I will also be asking for the license number of the person(s) who are acting as short sale negotiators in my Maryland transactions from here out.
There is a push to have real estate agents exempted from this rule, but for now, real esate agents are not exempt and thus cannot, without seperate licensing, be a party to the actual negotiations between seller and short sale lender.
This is an ever changing arena and we all need to make sure that we are current and up to date on those rules that may affect us and our clients. While this rule has been in place for quite some time, I truly did not know about it until last week. I do all I can to keep up on all matters that may affect my office and my clients but somehow this one just got past me.
You may want to check with your State Licensing Bureau to insure that you are not inadvertenly violating any licensing provisions that my have been mandated by your individual state.