Foreclosure Rescue Scam Legislation Introduced in Senate

Foreclosures are on the rise in the aftermath of the subprime fiasco and bursting property bubbles. The number of foreclosure filings jumped 75 percent in 2007, according to …

Foreclosures are on the rise in the aftermath of the subprime fiasco and bursting property bubbles. The number of foreclosure filings jumped 75 percent in 2007, according to RealtyTrac. Considering the skyrocketing numbers, it’s no surprise that “foreclosure rescue” scam artists are appearing in greater numbers. Sen. Herb Kohl (D-Wis.) is introducing legislation to combat these scams and protect distressed homeowners.

The bill is still being revised, but will likely introduce several changes for investors. It is believed the bill will primarily address the issue of foreclosure consultants. At this time, the Senate has defined a foreclosure consultant as anyone who does anything to “help avoid or delay foreclosure.”

The restrictions that were considered for this bill—banning leaseback to owner transactions, upfront foreclosure consultant fees, “subject to” transactions and advertisements that promise to save homeowners from foreclosure—were based on those contained in a 2004 Minnesota law governing the activities of real estate investors. The National Association of Realtors (NAR) supports using the Minnesota law as a model.

The primary concern of Kohl and NAR is that foreclosure rescue scams often target the elderly. “Senior homeowners are particularly vulnerable to rescue scams because many of them are on fixed incomes and rely on the equity in their homes as their primary financial asset. They are also particularly attractive to financial predators because they tend to have a larger amount of equity in their homes. Older homeowners are also more likely to experience foreclosure in the first place because, according to a study conducted by AARP, seniors are three times more likely to have sub-prime mortgage loans than younger borrowers,” Kohl said in his opening statement Feb. 13.

Claim up to $26,000 per W2 Employee

  • Billions of dollars in funding available
  • Funds are available to U.S. Businesses NOW
  • This is not a loan. These tax credits do not need to be repaid
The ERC Program is currently open, but has been amended in the past. We recommend you claim yours before anything changes.

The National Association of Responsible Home Rebuilders and Investors (NARHRI) believes that legislation based on the Minnesota model would be too harsh. The organization supports bans of leaseback to owner transactions and enforcement of laws regarding federal equity skimming as well as the banning of upfront foreclosure consultant fees.

“The problem when you go beyond those transactions is you start interfering with transactions that do work and that do keep people out of foreclosure,” John Grant, executive director of NARHRI, said. He cited a Maryland law that prohibits selling a home within 20 days of foreclosure. “How does that help a consumer who’s on the ropes, who’s 20 days from foreclosure, and under Maryland law they can’t sell their house?” he said.

NARHRI is pleased with the changes that have been made to the bill so far and that they will continue to work with legislators to tighten the language to be as concise as possible, he said.

Legislators and lobbyists walk a fine line when trying to agree on a bill that is beneficial for all parties. “This is one thing where the legislation can’t fall short, because then it will leave the scammers out there,” Grant said. “But if you go too far with it, then you handcuff real estate investors from doing what they do, which is providing assistance to homeowners that are distressed.”

Investors involved with foreclosure properties should keep an ear to the ground so they can remain informed about possible changes to their businesses as new drafts of the bill are released.


Does Your Small Business Qualify?

Claim Up to $26K Per Employee

Don't Wait. Program Expires Soon.

Click Here

Share This:

In this article