From a news release issued by the California Department of Real Estate:
This alert is written to warn consumers about marketing companies, unlicensed entities, lawyers, and so-called attorney-backed, attorney-affiliated, and lawyer referral entities that offer and sell false hope and request the payment of upfront fees for so-called mass joinder or class litigation that will supposedly result in extraordinary home mortgage relief.
On October 11, 2009, Senate Bill 94 was signed into law in California, and it became effective that day. It prohibited any person, including real estate licensees and attorneys, from charging, claiming, demanding, collecting or receiving an upfront fee from a homeowner borrower in connection with a promise to modify the borrowers residential loan or some other form of mortgage loan forbearance.
Got it? With very few exceptions up-front fee requirements are illegal.
Now let's go over the exceptions:
The advance fee ban issued by the Federal Trade Commission includes a narrow and conditional carve out for attorneys.
If lawyers meet the following four conditions, they are generally exempt from the rule:
They are engaged in the practice of law, and mortgage assistance relief is part of their practice.
They are licensed in the State where the consumer or the dwelling is located.
They are complying with State laws and regulations governing the same type of conduct the (FTC) rule requires.
They place any advance fees they collect in a client trust account and comply with State laws and regulations covering such accounts. This requires that client funds be kept separate from the lawyers' personal and/or business funds until such time as the funds have been earned.
It is important to note that the exemption for lawyers discussed above does not allow lawyers to collect money upfront for loan modifications or loan forbearance services, which advance fees are banned by the more restrictive California Senate Bill 94.