Proposed law would protect against real estate foreclosure scams
|January 23, 2006|
Several states already regulate procedure
In a growing effort to stem mortgage fraud, Chicago state lawmakers this month introduced a bill aimed at so-called "mortgage rescuers"--con artists who promise to bail out cash-strapped families but often end up taking their homes instead, the Chicago Tribune reported.
Other states are taking similar action. A bill aiming to protect consumers from scammers who prey on homeowners facing foreclosure is making its way through the Colorado legislature. Two other states, Minnesota and Maryland, have recently enacted laws protecting consumers from such scams.
Maryland's law went into effect last May, while Minnesota's was enacted a year and a half ago. New York and other states also have legislation pending, according to Elizabeth Renuart, staff attorney at the National Consumer Law Center. California has had such a law for a number of years.
Drafted by the state's Attorney General, Lisa Madigan, and introduced by State Sen. Jacqueline Collins, D-Chicago, the legislation was prompted by a Chicago Tribune series on mortgage fraud, Collins said, according to reports.
While legitimate financial counselors often can prevent families from falling into foreclosure, Madigan said low-income neighborhoods are rife with swindlers promising to save homes.
Put your company's products and services in front of the most qualified audience of real estate innovators and top producers. Advertise with Inman News.
While some simply grab a fee and disappear, the most dangerous actually wind up owning their clients' property.
The bill will be considered by the Illinois General Assembly in the spring session that began earlier this month.
Some of the mortgage rescuers offer phantom help to homeowners, taking a fee of a few thousand dollars for supposedly negotiating with the homeowner's creditors. After collecting the money, many do little or no work and essentially abandon the homeowner.
In the most insidious cases, the consultant will persuade families to deed their houses to investors for a year. The homeowners supposedly can use that time to clear up their credit and refinance the property, then take back title free and clear.
While such arrangements can be legal, in many cases the homeowners wind up becoming tenants and then being evicted.
The Mortgage Rescue Fraud Prevention Act addresses both forms of trickery by forcing the consultants to provide homeowners with a written contract spelling out the services and by giving the homeowner the right to cancel at any time before the services are actually performed, reports said.
In addition, the bill provides for criminal penalties for violations of the act, according to reports.
These components are also present in the bill being considered in Colorado.
Copyright 2006 Innam News