Mortgage Foreclosure Consultants Act (MFCA)
California Civil Code, Division 3, Part 4, Title 14, Article 1.5
Cal. Civ. Code §§ 2945–2945.11
- The Legislature finds and declares that homeowners whose
residences are in foreclosure are subject to fraud, deception,
harassment, and unfair dealing by foreclosure consultants from the
time a Notice of Default is recorded pursuant to Section 2924 until
the time surplus funds from any foreclosure sale are distributed to
the homeowner or his or her successor. Foreclosure consultants
represent that they can assist homeowners who have defaulted on
obligations secured by their residences. These foreclosure
consultants, however, often charge high fees, the payment of which is
often secured by a deed of trust on the residence to be saved, and
perform no service or essentially a worthless service. Homeowners,
relying on the foreclosure consultants' promises of help, take no
other action, are diverted from lawful businesses which could render
beneficial services, and often lose their homes, sometimes to the
foreclosure consultants who purchase homes at a fraction of their
value before the sale. Vulnerable homeowners are increasingly
relying on the services of foreclosure consultants who advise the
homeowner that the foreclosure consultant can obtain the remaining
funds from the foreclosure sale if the homeowner executes an
assignment of the surplus, a deed, or a power of attorney in favor of
the foreclosure consultant. This results in the homeowner paying an
exorbitant fee for a service when the homeowner could have obtained
the remaining funds from the trustee's sale from the trustee directly
for minimal cost if the homeowner had consulted legal counsel or had
sufficient time to receive notices from the trustee pursuant to
Section 2924j regarding how and where to make a claim for excess
- The Legislature further finds and declares that foreclosure
consultants have a significant impact on the economy of this state
and on the welfare of its citizens.
- The intent and purposes of this article are the following:
- To require that foreclosure consultant service agreements be
expressed in writing; to safeguard the public against deceit and
financial hardship; to permit rescission of foreclosure consultation
contracts; to prohibit representations that tend to mislead; and to
encourage fair dealing in the rendition of foreclosure services.
- The provisions of this article shall be liberally construed to
effectuate this intent and to achieve these purposes.
The following definitions apply to this chapter:
- "Foreclosure consultant" means any person who makes any
solicitation, representation, or offer to any owner to perform for
compensation or who, for compensation, performs any service which the
person in any manner represents will in any manner do any of the
- Stop or postpone the foreclosure sale.
- Obtain any forbearance from any beneficiary or mortgagee.
- Assist the owner to exercise the right of reinstatement
provided in Section 2924c.
- Obtain any extension of the period within which the owner may
reinstate his or her obligation.
- Obtain any waiver of an acceleration clause contained in any
promissory note or contract secured by a deed of trust or mortgage on
a residence in foreclosure or contained that deed of trust or
- Assist the owner to obtain a loan or advance of funds.
- Avoid or ameliorate the impairment of the owner's credit
resulting from the recording of a notice of default or the conduct of
a foreclosure sale.
- Save the owner's residence from foreclosure.
- Assist the owner in obtaining from the beneficiary, mortgagee,
trustee under a power of sale, or counsel for the beneficiary,
mortgagee, or trustee, the remaining proceeds from the foreclosure
sale of the owner's residence.
- A foreclosure consultant does not include any of the
- A person licensed to practice law in this state when the
person renders service in the course of his or her practice as an
attorney at law.
- A person licensed under Division 3 (commencing with Section
12000) of the Financial Code when the person is acting as a prorater
as defined therein.
- A person licensed under Part 1 (commencing with Section 10000)
of Division 4 of the Business and Professions Code when the person
makes a direct loan or when the person (A) engages in acts whose
performance requires licensure under that part, (B) is entitled to
compensation for the acts performed in connection with the sale of a
residence in foreclosure or with the arranging of a loan secured by a
lien on a residence in foreclosure, (C) does not claim, demand,
charge, collect, or receive any compensation until the acts have been
performed or cannot be performed because of an owner's failure to
make the disclosures set forth in Section 10243 of the Business and
Professions Code or failure to accept an offer from a purchaser or
lender ready, willing, and able to purchase a residence in
foreclosure or make a loan secured by a lien on a residence in
foreclosure on the terms prescribed in a listing or a loan agreement,
and (D) does not acquire any interest in a residence in foreclosure
directly from an owner for whom the person agreed to perform the acts
other than as a trustee or beneficiary under a deed of trust given
to secure the payment of a loan or that compensation. For the
purposes of this paragraph, a "direct loan" means a loan of a real
estate broker's own funds secured by a deed of trust on the residence
in foreclosure, which loan and deed of trust the broker in good
faith attempts to assign to a lender, for an amount at least
sufficient to cure all of the defaults on obligations which are then
subject to a recorded notice of default, provided that, if a
foreclosure sale is conducted with respect to the deed of trust, the
person conducting the foreclosure sale has no interest in the
residence in foreclosure or in the outcome of the sale and is not
owned, controlled, or managed by the lending broker; the lending
broker does not acquire any interest in the residence in foreclosure
directly from the owner other than as a beneficiary under the deed of
trust; and the loan is not made for the purpose or effect of
avoiding or evading the provisions of this article.
- A person licensed under Chapter 1 (commencing with Section
5000) of Division 3 of the Business and Professions Code when the
person is acting in any capacity for which the person is licensed
under those provisions.
- A person or his or her authorized agent acting under the
express authority or written approval of the Department of Housing
and Urban Development or other department or agency of the United
States or this state to provide services.
- A person who holds or is owed an obligation secured by a lien
on any residence in foreclosure when the person performs services in
connection with this obligation or lien.
- Any person licensed to make loans pursuant to Division 9
(commencing with Section 22000), 10 (commencing with Section 24000),
or 11 (commencing with Section 26000) of the Financial Code, subject
to the authority of the Commissioner of Corporations to terminate
this exclusion, after notice and hearing, for any person licensed
pursuant to any of those divisions upon a finding that the licensee
is found to have engaged in practices described in subdivision (a) of
- Any person or entity doing business under any law of this
state, or of the United States relating to banks, trust companies,
savings and loan associations, industrial loan companies, pension
trusts, credit unions, insurance companies, or any person or entity
authorized under the laws of this state to conduct a title or escrow
business, or a mortgagee which is a United States Department of
Housing and Urban Development approved mortgagee and any subsidiary
or affiliate of the above, and any agent or employee of the above
while engaged in the business of these persons or entities.
- A person licensed as a residential mortgage lender or servicer
pursuant to Division 20 (commencing with Section 50000) of the
Financial Code, when acting under the authority of that license.
- Notwithstanding subdivision (b), any person who provides
services pursuant to paragraph (9) of subdivision (a) is a
foreclosure consultant unless he or she is the owner's attorney.
- "Person" means any individual, partnership, corporation,
limited liability company, association or other group, however
- "Service" means and includes, but is not limited to, any of
- Debt, budget, or financial counseling of any type.
- Receiving money for the purpose of distributing it to
creditors in payment or partial payment of any obligation secured by
a lien on a residence in foreclosure.
- Contacting creditors on behalf of an owner of a residence in
- Arranging or attempting to arrange for an extension of the
period within which the owner of a residence in foreclosure may cure
his or her default and reinstate his or her obligation pursuant to
- Arranging or attempting to arrange for any delay or
postponement of the time of sale of the residence in foreclosure.
- Advising the filing of any document or assisting in any manner
in the preparation of any document for filing with any bankruptcy
- Giving any advice, explanation or instruction to an owner of a
residence in foreclosure which in any manner relates to the cure of
a default in or the reinstatement of an obligation secured by a lien
on the residence in foreclosure, the full satisfaction of that
obligation, or the postponement or avoidance of a sale of a residence
in foreclosure pursuant to a power of sale contained in any deed of
- Arranging or attempting to arrange for the payment by the
beneficiary, mortgagee, trustee under a power of sale, or counsel for
the beneficiary, mortgagee, or trustee, of the remaining proceeds to
which the owner is entitled from a foreclosure sale of the owner's
residence in foreclosure. Arranging or attempting to arrange for the
payment shall include any arrangement where the owner transfers or
assigns the right to the remaining proceeds of a foreclosure sale to
the foreclosure consultant or any person designated by the
foreclosure consultant, whether that transfer is effected by
agreement, assignment, deed, power of attorney, or assignment of
- "Residence in foreclosure" means a residence in foreclosure as
defined in Section 1695.1.
- "Owner" means a property owner as defined in Section 1695.1.
- "Contract" means any agreement, or any term thereof, between a
foreclosure consultant and an owner for the rendition of any service
as defined in subdivision (e).
- In addition to any other right under law to rescind a
contract, an owner has the right to cancel such a contract until
midnight of the third "business day" as defined in subdivision (e) of
Section 1689.5 after the day on which the owner signs a contract
which complies with Section 2945.3.
- Cancellation occurs when the owner gives written notice of
cancellation to the foreclosure consultant at the address specified
in the contract.
- Notice of cancellation, if given by mail, is effective when
deposited in the mail properly addressed with postage prepaid.
- Notice of cancellation given by the owner need not take the
particular form as provided with the contract and, however expressed,
is effective if it indicates the intention of the owner not to be
bound by the contract.
- Every contract shall be in writing and shall fully
disclose the exact nature of the foreclosure consultant's services
and the total amount and terms of compensation.
- The following notice, printed in at least 14-point boldface
type and completed with the name of the foreclosure consultant, shall
be printed immediately above the statement required by subdivision
"NOTICE REQUIRED BY CALIFORNIA LAW
_____________________________ or anyone working
for him or her CANNOT:
(1) Take any money from you or ask you for money
until ________________________________________ has
completely finished doing everything he or she
said he or she would do; and
(2) Ask you to sign or have you sign any lien,
deed of trust, or deed."
- The contract shall be written in the same language as
principally used by the foreclosure consultant to describe his or her
services or to negotiate the contract; shall be dated and signed by
the owner; and shall contain in immediate proximity to the space
reserved for the owner's signature a conspicuous statement in a size
equal to at least 10-point boldface type, as follows: "You, the
owner, may cancel this transaction at any time prior to midnight of
the third business day after the date of this transaction. See the
attached notice of cancellation form for an explanation of this
- The contract shall contain on the first page, in a type size
no smaller than that generally used in the body of the document, each
of the following:
- The name and address of the foreclosure consultant to which
the notice or cancellation is to be mailed.
- The date the owner signed the contract.
- The contract shall be accompanied by a completed form in
duplicate, captioned "notice of cancellation," which shall be
attached to the contract, shall be easily detachable, and shall
contain in type of at least 10-point the following statement written
in the same language as used in the contract:
"NOTICE OF CANCELLATION
(Enter date of transaction) (Date)
You may cancel this transaction, without any
penalty or obligation, within three business days
from the above date.
To cancel this transaction, mail or deliver a
signed and dated copy of this cancellation notice,
or any other written notice, or send a telegram to
(Name of foreclosure consultant)
(Address of foreclosure consultant's place of
NOT LATER THAN MIDNIGHT OF _______________________.
I hereby cancel this transaction
- The foreclosure consultant shall provide the owner with a copy
of the contract and the attached notice of cancellation.
- Until the foreclosure consultant has complied with this
section, the owner may cancel the contract.
- After the 65-day period following the foreclosure sale, the
foreclosure consultant may enter into a contract to assist the owner
in arranging, or arrange for the owner, the release of funds
remaining after the foreclosure sale ("surplus funds") from the
beneficiary, mortgagee, trustee under a power of sale, or counsel for
the beneficiary, mortgagee, or trustee. However, prior to entering
into that contract, the foreclosure consultant shall do all of the
- Prepare and deliver to the owner a notice in 14-point boldface
type and substantially in the form set forth below.
- Obtain a receipt executed by each owner and acknowledged
before a notary public, acknowledging a copy of the notice set forth
"NOTICE TO OWNER
(Date of Contract) (Date signed by Owner)
(Date of Foreclosure Sale)
You may be entitled to receive all or a portion
of the surplus funds generated from the
foreclosure sale of your real property located
at: __________________________, California on
_________________________without paying any fees
or costs of any kind to a third party. You
should check directly with the trustee or
beneficiary who conducted the foreclosure sale
of your property to determine the name, address,
and telephone number of the party to whom you
can direct inquiries regarding filing a claim
for surplus funds without paying a fee to a
third party. No person or entity may require you
to enter into any agreement requiring the
payment of a fee to that person or entity in
order to receive the surplus funds from
the foreclosure sale to which you may be
entitled during the 65 days after the date of
the trustee's sale."
It shall be a violation for a foreclosure consultant to:
- Claim, demand, charge, collect, or receive any compensation
until after the foreclosure consultant has fully performed each and
every service the foreclosure consultant contracted to perform or
represented that he or she would perform.
- Claim, demand, charge, collect, or receive any fee, interest,
or any other compensation for any reason which exceeds 10 percent per
annum of the amount of any loan which the foreclosure consultant may
make to the owner.
- Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation. That security shall be void and unenforceable.
- Receive any consideration from any third party in connection
with services rendered to an owner unless that consideration is fully
disclosed to the owner.
- Acquire any interest in a residence in foreclosure from an
owner with whom the foreclosure consultant has contracted. Any
interest acquired in violation of this subdivision shall be voidable,
provided that nothing herein shall affect or defeat the title of a
bona fide purchaser or encumbrancer for value and without notice of a
violation of this article. Knowledge that the property was
"residential real property in foreclosure," does not constitute
notice of a violation of this article. This subdivision may not be
deemed to abrogate any duty of inquiry which exists as to rights or
interests of persons in possession of residential real property in
- Take any power of attorney from an owner for any purpose,
except to inspect documents as provided by law.
- Induce or attempt to induce any owner to enter into a contract
which does not comply in all respects with Sections 2945.2 and
- Enter into an agreement to assist the owner in arranging, or
arrange for the owner, the release of surplus funds prior to 65 days
after the trustee's sale is conducted, whether the agreement involves
direct payment, assignment, deed, power of attorney, or assignment
of claim from an owner to the foreclosure consultant or any person
designated by the foreclosure consultant.
Any waiver by an owner of the provisions of this article
shall be deemed void and unenforceable as contrary to public policy.
Any attempt by a foreclosure consultant to induce an owner to waive
his rights shall be deemed a violation of this article.
- An owner may bring an action against a foreclosure
consultant for any violation of this chapter. Judgment shall be
entered for actual damages, reasonable attorneys' fees and costs, and
appropriate equitable relief. The court also may, in its
discretion, award exemplary damages and shall award exemplary damages
equivalent to at least three times the compensation received by the
foreclosure consultant in violation of subdivision (a), (b), or (d)
of Section 2945.4, and three times the owner's actual damages for any
violation of subdivision (c), (e), or (g) of Section 2945.4, in
addition to any other award of actual or exemplary damages.
- The rights and remedies provided in subdivision (a) are
cumulative to, and not a limitation of, any other rights and remedies
provided by law. Any action brought pursuant to this section shall
be commenced within four years from the date of the alleged
Any person who commits any violation described in Section
2945.4 shall be punished by a fine of not more than ten thousand
dollars ($10,000), by imprisonment in the county jail for not more
than one year, or in the state prison, or by both that fine and
imprisonment for each violation. These penalties are cumulative to
any other remedies or penalties provided by law.
If any provision of this article or the application thereof
to any person or circumstance is held to be unconstitutional, the
remainder of the article and the application of such provision to
other persons and circumstances shall not be affected thereby.
- A foreclosure consultant is liable for all damages
resulting from any statement made or act committed by the foreclosure
consultant's representative in any manner connected with the
foreclosure consultant's (1) performance, offer to perform, or
contract to perform any of the services described in subdivision (a)
of Section 2945.1, (2) receipt of any consideration or property from
or on behalf of an owner, or (3) performance of any act prohibited by
- "Representative" for the purposes of this section means a
person who in any manner solicits, induces, or causes (1) any owner
to contract with a foreclosure consultant, (2) any owner to pay any
consideration or transfer title to the residence in foreclosure to
the foreclosure consultant, or (3) any member of the owner's family
or household to induce or cause any owner to pay any consideration or
transfer title to the residence in foreclosure to the foreclosure
- Any provision in a contract which attempts or purports
to limit the liability of the foreclosure consultant under Section
2945.9 shall be void and shall at the option of the owner render the
contract void. The foreclosure consultant shall be liable to the
owner for all damages proximately caused by that provision. Any
provision in a contract which attempts or purports to require
arbitration of any dispute arising under this chapter shall be void
at the option of the owner only upon grounds as exist for the
revocation of any contract.
- This section shall apply to any contract entered into on or
after January 1, 1991.
- Any representative, as defined in subdivision (b) of
Section 2945.9, deemed to be the agent or employee or both the agent
and the employee of the foreclosure consultant shall be required to
provide both of the following:
- Written proof to the owner that the representative has a valid
current California Real Estate Sales License and that the
representative is bonded by an admitted surety insurer in an amount
equal to at least twice the fair market value of the real property
that is the subject of the contract.
- A statement in writing, under penalty of perjury, that the
representative has a valid current California Real Estate Sales
License, that the representative is bonded by an admitted surety
insurer in an amount equal to at least twice the value of the real
property that is the subject of the contract and has complied with
paragraph (1). The written statement required by this paragraph
shall be provided to all parties to the contract prior to the
transfer of any interest in the real property that is the subject of
- The failure to comply with subdivision (a) shall, at the
option of the owner, render the contract void and the foreclosure
consultant shall be liable to the owner for all damages proximately
caused by the failure to comply.
The following definitions apply to this chapter:
- "Equity purchaser" means any person who acquires title to any
residence in foreclosure, except a person who acquires such title as
- For the purpose of using such property as a personal residence.
- By a deed in lieu of foreclosure of any voluntary lien or
encumbrance of record.
- By a deed from a trustee acting under the power of sale
contained in a deed of trust or mortgage at a foreclosure sale
conducted pursuant to Article 1 (commencing with Section 2920) of
Chapter 2 of Title 14 of Part 4 of Division 3.
- At any sale of property authorized by statute.
- By order or judgment of any court.
- From a spouse, blood relative, or blood relative of a spouse.
- "Residence in foreclosure" and "residential real property in
foreclosure" means residential real property consisting of one- to
four-family dwelling units, one of which the owner occupies as his or
her principal place of residence, and against which there is an
outstanding notice of default, recorded pursuant to Article 1
(commencing with Section 2920) of Chapter 2 of Title 14 of Part 4 of
- "Equity seller" means any seller of a residence in
- "Business day" means any calendar day except Sunday, or the
following business holidays: New Year's Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving Day, and Christmas Day.
- "Contract" means any offer or any contract, agreement, or
arrangement, or any term thereof, between an equity purchaser and
equity seller incident to the sale of a residence in foreclosure.
- "Property owner" means the record title owner of the
residential real property in foreclosure at the time the notice of
default was recorded.