The days of simply opening up and starting a loan modification business have come to an end in Florida. Individuals or businesses providing loan modification services must now be licensed as a mortgage broker by the Florida Office of Financial Regulation (OFR) in order to conduct business.
The Florida Legislature recently passed Senate Bill SB 2226. This law makes significant changes to Florida’s mortgage brokerage law — Chapter 494, Florida Statutes — effective Jan. 1, 2010. In particular, the new law covers negotiation of existing loans as being part of the duties of a mortgage broker. Any individual or business attempting to negotiate a loan mortgage modification will now be required to obtain a license through OFR. Also, there are new disclosures required in order to perform a loan modification — large type print on contracts and a three day rescission period are among a few of the changes.
This new law requires “loan originators” to obtain a license. Prior to the amended law, there was a large loophole that allowed salaried employees of a mortgage broker to act as a loan originator and still receive compensation for bringing a borrower and lender together.
The new law was sparked by hundreds of complaints filed with the state attorney general’s office in Tallahassee. While only 59 complaints were filed in 2008, the number skyrocketed to approximately 3,750 in 2009, according to Florida Attorney General Bill McCollum, who recently appeared on the Credit Report with Bill Lewis.
In an effort to combat the increase in foreclosure rescue scams within an industry previously unregulated, General McCollum sued three foreclosure rescue firms — and the attorneys who worked for them — alleging that they charged advance “qualifying payments” as high as $1,299 to perform loan modifications in violation of state law. Filed in Miami-Dade County Circuit Court on December 17, 2009, the suit also claims the company required clients to establish escrow accounts for additional fees and deceived them by implying the money was for legal representation.
After receiving numerous complaints — the majority originating from consumers outside Florida — the attorney general began investigating Kirkland Young LLC in July, 2009. State regulators soon realized that the business was affiliated with ABK Consultants Inc. and Attorney Aid LLC, which were also named in the suit. Although located in Miami-Dade, the businesses solicited customers nationwide. The legal action seeks to shut down the three companies, a $10,000 fine for each violation of state law, as well as restitution for consumers scammed in the process. Although in receivership, Kirkland Young has also been sued by the Federal Trade Commission.
Through Jan. 31, 2010 South Florida ranked fourth in the nation for home loan modifications, with 37,451 under President Barack Obama’s Making Home Affordable Program. Nationwide, 24 percent of the 3.3 million homes with distressed loans have been modified, according to a U.S. Department of the Treasury report. While the new law is not going to eliminate loan modification scams completely, it should make them more difficult.
Soreide Law Group will represent you in front of the Florida Office of Financial Regulation regarding loan modification licensing issues. To speak to an attorney, please call: (888)760-6552 or visit our website at: www.floridaprofessionallicense.com.