The City Council voted Tuesday to make it illegal for so-called mortgage consultants to charge an upfront fee for services when helping distressed homeowners try to modify their payments.

Mayor Antonio Villaraigosa touted the law as the first of its kind in the nation and said it was a tool to “help residents keep a roof over their heads.”

State law already prohibits mortgage consultants from demanding upfront fees from homeowners who are in default, the first stage of foreclosure. The new Los Angeles law, which the council approved unanimously, will apply those protections to all homeowners.


As the housing crisis has worsened, signs advertising such services have sprouted across Southern California. Some of the services are legitimate, officials said, but others are not.

Other provisions of the law require a written contract between mortgage consultant and homeowner, which homeowners have a right to cancel within seven days, and forbid mortgage consultants from taking a lien on personal property as a form of payment.

-- Jessica Garrison