Delaware can now officially go after violators of the state's new Mortgage Loan Modification Services Act, which is aimed at protecting homeowners from providers offering these services in unfair or deceptive ways.
Among other things, the law that went into effect Wednesday prohibits providers from misrepresenting “expressly or by implication” that they are “affiliated with, endorsed or approved by or otherwise associated with” government entities or homeowner assistance plans, or “the maker, holder or servicer of the dwelling loan.”
They also cannot “represent, expressly or by implication, that a homeowner cannot or should not contact or communicate with his or her lender or servicer.”
Providers must give unaltered, dated written contracts that include the provider's name and address to consumers for at least a 24-hour review period before they are signed. The contracts must be in at least 12-point type and must be dated and initialed by the consumer on each page.
The contracts must also “fully disclose the exact nature of the modification services to be provided and the total amount and terms of compensation to be received.”
Another requirement for the contracts is that they include “a provision that allows the homeowner to cancel at any time without penalty and a separate, detachable page designated ‘notice of cancellation' containing the name and address of the provider for the use of the homeowner if services are to be cancelled.”
Unless they fall into an “exempted” category, those who provide mod services to an individual who they should “reasonably” know lives in the state at the time they agree to provide services also must register with the state's attorney general and maintain a certificate of registration.
Certain licensed mortgage loan originators, brokers, lenders, debt management service providers and attorneys are among those who are exempt, as are certain government-regulated banks, trust companies, savings and loan associations, credit unions and insurance companies. Also exempt are certain government entities and nonprofits engaged in housing advocacy.
Among the steps required to apply for registration is a nonrefundable registration fee of $1,000 that will be allocated to the state's consumer protection fund and an application for registration. The fund may be used to support foreclosure relief programs. Renewal fees of $500 annually also are required to continue one's registration.
Other requirements to apply for registration include the submissions of “a copy of all print or electronic advertising and scripts of telephonic or broadcast advertising” and “an original corporate surety bond, with surety provided by a corporation authorized to transact business” in the state, “in the principal sum of $100,000.”
The law additionally requires that “annual commercial communication by a mortgage loan modification services provider…include the following statements in a clear and prominent format:
(‘(Name of Company) is not associated with the government, and our service is not approved by the government or your lender.
‘Even if you accept this offer and use our service, your lender may not agree to change your loan.
‘You may stop doing business with us at any time. You may accept or reject any offer of mortgage modification we may obtain from your lender or servicer. If you reject the offer, you do not have to pay us.'"
Grounds for denial of the registration application include putting “information that is materially erroneous or incomplete” on it.
In addition, applications will be denied if an officer, director, member or owner of the application “has been convicted of a crime, or suffered a civil judgment, involving dishonesty.”
The AG also may deny an application if “the financial responsibility, experience, character, or general fitness of the applicant or its owners, members, directors, employees, or agents does not warrant belief that the business will be operated in compliance” with the law.
In addition, the law prohibits providers from requesting or receiving payment of any fee “or other consideration until the homeowner has executed a written agreement between the homeowner and the dwelling loan holder or servicer incorporating the offer of mortgage modification services obtained by the provider.”
Those found in court to have violated the law face a civil penalty of up to $10,000. If deception is against an elderly or disabled person there will be an additional civil penalty of up to $10,000 for each violation. Under the law, each day a “willful” violation continues will be considered a separate violation.
