Can I Charge a Fee For Assisting in a Loan Modification in California?
Full Question:
Answer:
According to the real estate link below, rather than charging an advance fee, a real estate broker and homeowner may agree that the broker will perform a series of separate loan modification services and be compensated once each service has been performed. For example, a broker and homeowner may agree that the homeowner will pay a certain amount after the broker provides the homeowner with an initial consultation, another amount after the broker prepares and submits a loan modification package to the lender, and another amount after the broker has negotiated the loan modification with the homeowner’s lender. Alternatively, the broker and homeowner may agree that the broker will charge a certain hourly rate for services rendered, and that the broker will collect that hourly fee after performing an hour of work.
Other things a broker could do to help collect a fee includes prescreening the homeowner to assess his or her creditworthiness upfront, entering into a written loan modification agreement, and following up with the client to collect payment once the broker’s compensation is due.
The statute of frauds is a law that requires certain contracts to be in writing and signed to be enforceable. As an example, a real estate broker seeking to recover compensation for listing a property for sale must have a written agreement signed by the seller (Cal. Civ. Code § 1624). However, the statute of frauds does not cover an agreement to compensate a broker for providing loan modification services or mortgage broker services. Hence, if no advance fees are collected, a broker may sue to recover compensation for performing loan modification services absent any agreement in writing.
Even though a broker may pursue a claim for compensation absent a written loan modification agreement, it is highly recommended to get the agreement in writing and signed by the homeowner. A written loan modification agreement can explain each party’s rights and obligations to help avoid future litigation. Furthermore, if a broker chooses to sue for compensation, a written loan modification agreement can serve as evidence of the broker’s entitlement to compensation.
For further discussion, please see also:
http://www.californialisting.com/Loan_Modification_2009/page_2195741.html
http://www.law.yale.edu/documents/pdf/cbl/Mayer_Morrison_Piskorski_New_Proposal.pdf
