Friday, May 02, 2008

Protecting distressed homeowners

Interesting article I read today in the Miami Herald.

State lawmakers passed a bill to protect delinquent borrowers from losing their homes and and money to fraudulent foreclosure rescue services.

The Miami Herald – By Monica Hatcher - May 2, 2008

Almost as soon as she found out her lender had filed foreclosure, Deneen Whitley began getting phone calls, letters and pamphlets from foreclosure rescue services offering to save her Cutler Bay home from the clutches of the bank.

Whitley has resisted the offers so far, mainly because she's heard of people losing their homes after using such services. The temptation lingers, though, as the foreclosure clock keeps ticking with no resolution in sight.

''I have thought about it,'' Whitley said.

In an effort to protect the growing number of homeowners in the same situation, the state Senate approved a foreclosure fraud bill Thursday, reining in the growing field of consultants and equity purchasers offering home-saver services to delinquent borrowers. Some have been accused of duping homeowners into signing over their property and then selling for profit or charging them stiff fees to get it back -- a scheme sometimes called equity stripping.

Sen. Mike Fasano, R-New Port Richey, one of the bill's sponsors, said the legislation would help bring transparency to the foreclosure rescue business. The bill passed the House earlier this session. Gov. Charlie Crist is expected to sign it.

The bill requires foreclosure rescue companies to provide disclosures in contracts, including the fact that a homeowner may be selling his or her property.

Homeowners also would get a day to consider a contract before signing it, as well as three days to back out of the agreement. The new requirements stem from homeowners' complaints of being rushed into signing contracts they didn't understand.

''When you have people who are desperate to save something of such value to them, you have scammers and con artists trying to take advantage of the situation,'' said Sandi Copes, a spokeswoman with Florida's attorney general's office.

The attorney general has received 1,800 complaints about mortgage and foreclosure fraud in recent years, and is investigating four companies, Copes said.

In a typical rescue scheme, an investor offers to pay up the delinquent amount on someone's loan. In return, the homeowner agrees to sign over a deed in a lease buy-back arrangement.

In some cases, foreclosure rescuers have been known to take out large second mortgages or home equity loans on the property, making it impossible for the homeowner to repurchase.

Before entering into a lease buy-back agreement, investors would have to demonstrate that the homeowner has a reasonable ability to repurchase the property.

In addition, foreclosure consultants, who often take money in exchange for help dealing with lenders, would be banned from accepting payment before promised services are performed.

Copes said the bill also enhances civil remedies for homeowners under the state's Unfair and Deceptive Trade Practices Act.

Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
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