New rules require mortgage modification consultants to have licenses

Permanent regulations that require licenses for home mortgage modification and foreclosure consultants are expected to become effective Wednesday, but one important question remains.

Can these licensed consultants represent clients in mediation sessions with mortgage lenders?

Bill Gang, spokesman for the Nevada Supreme Court, said non-attorneys cannot provide legal advice. “You can perform certain functions and serve a client,” he said.

Gang referred further questions to the State Bar of Nevada, which referred calls to a coordinator for the mediation program, who could not be reached for comment.

The mediation program was established through a new state law. The law allows homeowners who have received a foreclosure notice to have mediation with the lender.

The first mediations are scheduled to begin in September. Gang estimates that 1,000 mediations will be conducted every month after the program starts.

At a hearing Tuesday in the Sawyer Building, Mortgage Lending Commissioner Joseph Waltuch said he could not advise licensees on whether they can represent clients in mortgage mediation meetings. Waltuch does not have authority over the mediation program.

Waltuch adopted the final regulations under a separate new law requiring the licenses for mortgage consultants. The rules probably will become effective Wednesday after review by other state officials, he said.

Meanwhile, the mortgage lending division has licensed about 25 firms as residential mortgage loan modification and foreclosure consultants under temporary rules. An additional 75 individuals associated with the firms also have become licensed.

Mandy Peacock, managing partner at AAA Home Rescuers, said many mortgage and foreclosure consultants favor the law and regulations.

“Our industry absolutely needed tight regulation to make sure everybody played by the rules,” Peacock said.
Ben Rodriguez of 1st Loan Modification of America mentioned problems with mortgage modification scams prior to licensing.

“I’m very happy for me and for the customers as well” that the profession is licensed, he said.

Added Waltuch, “The scams have been very rampant.”

Unlicensed consultants often charged up-front fees and then provided no assistance to desperate homeowners facing foreclosure.

Although attorneys are exempt from licensing requirements, Peacock said some attorneys are annoyed that their assistants must obtain licenses to consult on mortgage modifications and foreclosures.

Consultants who help clients seek home mortgage loan modifications from lenders need not be licensed if they do it for free, he said. Nor are nonprofit organizations required to obtain licenses.

For-profit consultants must take classes, post bonds and follow rules adopted by the mortgage division.

Licensed consultants are required to keep customer funds in separate trust accounts and to have their books audited yearly.

The regulations limit what the consultants can state in advertisements.

“The very first thing you can’t do is guarantee anything,” Waltuch warned consultants. “You cannot falsely advertise.”

Modification and foreclosure consultants may not use the name of a lender or financial institution in ads without the approval of the lender, he said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.