Proposed Changes To FS 501.1377

I wrote an article a few months ago about whether or not Florida attorneys could be considered ‘foreclosure rescue consultants’ under FS 501.1377.  My question at the time was: “what was the legislative intent behind removing the attorney exemption in FS 501.1377?”

Well, three months later we have a better idea, as there are presently some changes to FS 501.1377 and Chapter 494 underway with CS/SB 2226.  Based on what’s been added and marked up as of today’s date in CS/SB 2226, attorneys will now be required to become “a loan originator, mortgage broker, or mortgage lender” when completing loan modifications for clients unless the attorney negotiates the loan modification “as an ancillary matter to the attorney’s representation of the client”.  So basically any of the attorneys that are advertising ‘loan modifications’ will be required to become licensed in the mortgage business.

I also noticed that the present changes to FS 501.1377 have removed the definition of ‘foreclosure rescue consultant’ from the Act and since it appears the amendments to Chapter 494 F.S. referenced above apply to ‘loan modifications’, it would appear that companies engaged in short sale processing in Florida would no longer be subject to its provisions or at least that might have been the intent.  Only problem with that is a ‘loan originator’ is defined (in part, emphasis added) as: “an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain.”  So, it appears that every Florida licensed real estate agent who negotiates a short sale must also obtain a Florida loan originator license. Rut-roh!

It should be noted that as of the date of this post we don’t have the final version yet and since that’s the case, I’m going to recommend that everyone in Florida who objects to this provision send an email to Senator Mike Fasano fasano.mike.web at flsenate.gov with a link to this post stating that ‘short sales’ should be specifically exempted from the definition of ‘loan originator’. 

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.