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Conforming Loan Limits Temporarily Increased

On February 13, 2008, President Bush signed into law the Economic Stimulus Act of 2008 (H.R. 5140). In
addition to providing economic stimulus in the form of income tax credits to individuals, the bill
temporarily increases the caps on mortgage loans eligible for (i) purchase by Fannie Mae and Freddie Mac
(the “GSEs”), and (ii) insurance by the Federal Housing Administration. Under the bill, (i) GSE
conforming loan limits are increased to 125% of the area median home price (up to a maximum of 175% of
the previously determined 2008 limit), and (ii) the caps for FHA insurance in “high cost areas” are
increased to 125% of the area median home price (with discretionary authority granted to HUD to
increase those caps by up to an additional $100,000). These increases will take conforming loan limits up
to $729,750 in high cost areas like California.

The increases apply to mortgage loans originated during the period beginning on July 1, 2007 and ending
on December 31, 2008. Loans originated during this time period will continue to be eligible for purchase
by the GSEs during the entire term of the mortgage even if the purchase occurs after December 31, 2008.

Although the increases are temporary, many believe that it will be difficult to roll them back in the
future. Only time will tell. The full text of the bill can be found here.

For more information, please contact Christian Law Group
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.