Loan Reduction, In House Financing and St. Louis Home Loan News: 2011 Law Signed By Governors Prevents Foreclosure Scams
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A new law signed into effect in December 2011 is designed to regulate the foreclosure industry and require foreclosure consultants to be licensed by the state Department of Banking and Insurance. Governor Chris Christie also signed the Foreclosure Rescue Fraud Prevention Act back in December
In the scams, “counselors” would, for high upfront fees, claim to raise a homeowner’s credit rating or change the terms of their existing mortgage, or sign over a deed to someone who promises to rent back the residence and in the future sell it back to the original owner. The companies would then take out additional mortgages on the properties without the homeowners’ knowledge, and in some cases falsify information on the loan application.
The homeowners lose their fees, any equity they have built in the house and frequently ownership of the house itself. Under the law, the foreclosure consultants are prohibited from collecting any fees and are limited from charging excessive rates before completing the terms of the written contract and securing relief for the homeowner.
The consultant companies must also post a bond with the state before conducting business, and are subject to a $10,000 fine for the first offense and $20,000 for each subsequent offense. The bill initially passed both the state Senate and Assembly in June.
But Governor Chris Christie conditionally vetoed it over concerns a stipulation that would require distressed properties to be sold for 82 percent of their fair market value because it could inadvertently affect nearly all distressed home sales. Now, the law states that only those sales involving participation with foreclosure consultants qualify.
Governor Rick Snyder of Michigan also signed a series of bills that clarify and improve the pre-foreclosure and foreclosure process and will help keep Michigan residents in their homes. It is a bipartisan legislative package that passed both chambers unanimously.
“This legislation helps protect families and ensures the stability of Michigan communities,” said Snyder. “When foreclosures are prevented, homes are not vacated, families are not displaced and townships, cities and counties do not lose the tax base provided by home ownership.”
In September 2011, there was one foreclosure filing for every 149 homes in Michigan. Michigan also had the seventh highest foreclosure rates and foreclosure filing totals in the U.S. The related bills signed include House Bill 4542, 4543, and 4544, which are now Public Acts 301, 302 and 303. Lenders are now required to provide written notice that includes a list of housing counselors when foreclosure proceedings begin so homeowners can seek immediate advice.
Also, additional time has been added so homeowners can potentially arrange for loan modifications in order to prevent foreclosure. The legislation also removes the andate to publish pre-foreclosure notices in newspapers to help prevent homeowners from being solicited by foreclosure rescue and mortgage loan modification scams.
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