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Supervised Financial Organizations Required to Provide Foreign Translations

For some time now, lenders and others who negotiate specified contracts primarily in Spanish, Chinese,
Tagalog, Vietnamese and Korean have been required under California law to provide a written
translation of that contract, in the applicable foreign language, to the other contracting party prior to the
time of signing. The requirement to provide such a translation arose from the legislature’s recognition
that due to inalterable demographic shifts, English is no longer the primary language of a sizeable and
growing segment of the California population.

Up until now, and with certain exceptions, the requirement to provide a foreign language translation was
limited to loans or extensions of credit “secured other than by real property.” However, on October 11,
2009, that changed when Governor Arnold Schwarzenegger signed Assembly Bill 1160 into law. Under
this bill, which added new section 1632.5 to the Civil Code, supervised financial organizations that
negotiate loans or extensions of credit secured by residential real property primarily in one of the above-
referenced languages will also be required to deliver a translation of the contract to the other party prior
to its execution.

With the effective date for Assembly Bill 1160 looming on the horizon, here is what you need to know in
order to stay compliant. First, the bill applies to “supervised financial organizations.” A “supervised
financial organization” is defined as a state chartered bank, savings association, credit union, holding
company, Industrial Loan Company, Finance Lender, and Residential Mortgage Lender. Federally
chartered banks, credit unions, savings banks and thrifts, however, are exempt from the bills
requirements.

Second, the bill requires the delivery of a statutorily prescribed foreign language form (to be developed
jointly by the Department of Corporations and the Department of Financial Institutions) to the
contracting party whenever a supervised financial organization negotiates a loan or extension of credit
secured by residential real property primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean. The
form must be delivered to the borrower no later than three (3) business days after receipt of a written
application. An updated form must also be provided to the borrower prior to consummation of the loan
if any of the loan terms materially change after the original translation is provided.

Third, a supervised financial organization is relieved of its obligations to provide a foreign language
translation if the party with whom it is negotiating, negotiates the terms of the contract through his or
her own interpreter. In order for this exemption to apply, the interpreter (1) must not be a minor, (2)
must be able to speak fluently and read with full understanding both the English language and the
language in which the contract is negotiated, and (3) must be neither employed by nor made available
through, the supervised financial organization.

Fourth, the failure to comply with Assembly Bill 1160 is deemed a violation of a supervised financial
organization’s licensing law and may result in administrative penalties up to $2500 for the first violation,
$5000 for the second violation, and $10,000 for each subsequent violation. An action for violations of the
law may be initiated only by a licensing agency or the Attorney General. There is no private right of
action.

Finally, Assembly Bill 1160 becomes operative on July 1, 2010, or 90 days following the issuance by both
the Department of Corporations and the Department of Financial Institutions of the statutorily required
foreign translation form, whichever date is later. As of the date of this writing, neither the Department
of Corporations nor the Department of Financial Institutions has yet issued the required form.

For more information about this subject, please contact Christian Law Group. Christian Law Group’s
practice is focused on real estate transactions and litigation, residential mortgage lending, real estate
finance, and related matters.
Intelligent Advice. Sound Solutions.

Mortgage Loan Loss Mitigation- A Primer

With a record number of homeowners currently facing the loss of their homes through imminent
foreclosure, and untold others facing the threat of default as the interest rates on their non-traditional
mortgages continue to adjust upward, a cottage industry of sorts has recently sprung to life. Whether the
businesses which comprise this new industry market themselves as loss mitigation companies, loan
modification specialists, loan repair experts, or mortgage foreclosure consultants, they all promise
homeowners essentially the same thing: an ability to help them avoid foreclosure through negotiated loan
modifications, forbearance agreements, short sales, and/or deeds in lieu of foreclosure. They also all
charge the homeowner a fee for the services they promise to provide, which fee is normally demanded
up front and before any services have actually been performed. The amount of this fee varies, but the
general range appears to be between $2,000 and $5,000.

Although there is unquestionably a demand for these types of service providers, particularly with the
recent passage in California of S.B. 1137, the field is quickly becoming saturated. Unfortunately, many of
the loan officers, real estate agents, multi-level marketers, and retail sales associates flooding into this
market space in hopes of making a quick buck are nothing more than hucksters, charlatans and
opportunists who are violating California law and have no idea what they are doing.

So, if you are a homeowner in distress, how do you know whether the company you are working with
is legitimate? If you are a foreclosure consultant, or are contemplating entering into the field, how do
you avoid inadvertently violating California law? Here are the basics that you need to know in either
case.

First, those who provide the types of services described above are known as “foreclosure consultants”
and their conduct is governed by California Civil Code sections 2945-2945.11. A “foreclosure consultant”
is, with limited exceptions, anyone who for payment, offers to perform any of the following services for
an owner whose residential real property is in foreclosure:

•        Stopping or postponing a foreclosure sale.
•        Obtaining any forbearance from a lender.
•        Assisting a homeowner in reinstating a loan in foreclosure.
•        Obtaining an extension of time within which a homeowner can reinstate a loan in foreclosure.
•        Obtaining a waiver of an acceleration clause contained in a secured promissory note.
•        Assisting a homeowner in obtaining a loan or advance of funds.
•        Avoiding impairment of the homeowner’s credit because of foreclosure.
•        Savings a homeowner’s residence from foreclosure.

Those functioning as foreclosure consultants in California are subject to variety of statutory restrictions
and requirements. These include the following:

•        Foreclosure consultants must have a written agreement with homeowners which discloses the exact
nature of the services to be provided and the total amount to be paid.
•        Foreclosure consultant agreements must allow the homeowner the right to cancel the agreement
within three (3) business days after the agreement is signed.
•        Foreclosure consultants must give a copy of the signed written agreement to the homeowner.
•        Foreclosure consultants may not charge or collect any fee until after they have performed all
services they have committed to perform.
•        Foreclosure consultants may not take a wage assignment or a lien on any real or personal property
to secure payment of their fee. Any such lien is void and unenforceable.
•        Foreclosure consultants may not receive payment from any third party unless that payment is fully
disclosed to the homeowner.
•        Foreclosure consultants may not obtain directly from the homeowner, an interest in the
homeowner’s residence.
•        Foreclosure consultants may not take a power of attorney from a homeowner for any purpose
other than to inspect documents.
•        Foreclosure consultants may not get a homeowner to waive his or her statutory rights.
•        Foreclosure consultants may not attempt to limit their liability under the governing statutes.
•        Representatives of foreclosure consultants must provide written proof to the homeowner that they
possess a valid and current California Department of Real Estate Sales License and that they are bonded.

Foreclosure consultants are subject to severe penalties if they violate the law. First, foreclosure
consultants can be sued for damages by their homeowner clients. If the homeowner prevails, the
foreclosure consultant will be required to pay the homeowner his or her actual damages, attorneys’ fees
and costs. They may also be required to pay the homeowner punitive damages up to three times the
amount of the actual damages. Second, for each violation of California law, a foreclosure consultant may
be fined up to $10,000, may be imprisoned in the county jail for up to one year, or both.

This is a tricky area of the law which is largely unknown to consumers and is being ignored by many
foreclosure consultants. But those in the business ignore the law at their own risk, as state regulators and
local District Attorneys are beginning to focus attention on foreclosure consultants and pursue them for
violations of the law. So, whether you are a homeowner who believes that you may have been taken
advantage of by an unscrupulous foreclosure consultant, or you are a legitimate foreclosure consultant
that is interested in operating within legal boundaries, you owe it to yourself to become familiar with
California’s mortgage foreclosure consultants statute.

For more information about this subject, please contact Christian Law Group. Christian Law Group’s
practice is focused on real estate transactions and litigation, residential mortgage lending, real estate
finance, loss mitigation, and related matters.
Intelligent Advice. Sound Solutions.