Question: If a written agreement for loan modification services is constructed whereby as milestones are reached in the loan modification process the borrower agrees to compensate the licensee is that a violation of Chapter 494, Florida Statutes? Alternatively, can a licensed entity have the borrower enter into separate loan modification agreements that conform to Section 494.00296(2)(c), Florida Statutes? In other words, in lieu of having a single loan modification agreement whereby the licensee is receiving payment throughout the modification process as benchmarks are obtained; can a licensee enter into separate agreements for various services thereby being compensated as each contract is fulfilled?
Answer: A written agreement for loan modification services, in which a borrower agrees to compensate the licensee as milestones are reached in the loan modification process, would be a violation of Chapter 494, Florida Statutes. Section 494.00296(1)(c), Florida Statutes (2009) provides:
(1) PROHIBITED ACTS.-when offering or providing loan modification services, a mortgage broker, mortgage brokerage business, mortgage lender, or correspondent mortgage lender licensed, or required to be licensed, under ss. 494.001-494.0077 may not:
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(c) Solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for loan modification services before completing or performing all services included in the agreement for loan modification services. . . . (Emphasis supplied)
Since the agreement described above contemplates a sequence of services, the fee would be earned after all services are performed. Similarly, if a licensed entity entered several contracts with a borrower to obtain payment as milestones are being reached towards modifying a loan, this would be a violation of Chapter 494, Florida Statutes. This is because the term “loan modification services”, underlined above, contemplates modifying an existing loan as opposed to a partial service towards modifying an existing loan.
