Florida, one of the states hardest hit by the housing market collapse, now has a new weapon to counter "foreclosure rescue" fraud.
Gov. Charlie Crist has signed the Foreclosure Rescue Fraud Prevention Act of 2008, ensuring that homeowners are properly informed about their rights before signing a contract with a foreclosure rescue entity in addition to other protections.
"Florida homeowners now have an important tool to protect their most valuable possession their homes," said Florida Attorney General McCollum. "By protecting our citizens who face the threat of foreclosure from those individuals who would prey on them, this law will ensure that homeowners will not be further victimized at a time of personal financial crisis."
The Sunshine State has been rife with fraud as thousands of homeowners have defaulted on their loans and faced foreclosure. Often times these unscrupulous "rescuers" persuade desperate homeowners to sign over the deed to their property.
The new law requires that a foreclosure rescue consultant a person who tries to arrange a new payment plan with lender or other alternative to foreclosure - provide a written agreement to the consumer and obtain the consumer's signature before beginning any services.
The legislation further requires that the rescue consultant include in the written agreement a specific notice of the homeowners' right to cancel, including the procedure for canceling, and a disclosure that the consumer should contact his or her lender first before signing because the lender may be willing to negotiate a payment plan free of charge.
"Desperate homeowners on the brink of losing their homes are grasping for any assistance available, and too many of them are falling victim to scam artists," said State Sen. Mike Fasano, the bill's Senate sponsor. "This legislation provides much-needed safeguards to assist families in staying in their homes."
In 2007 alone, there were 245,000 mortgage foreclosures in Florida, putting the state second in the nation in that dubious ranking. McCollum says Florida also had the highest rate of mortgage fraud last year. As the number of Floridians facing foreclosure increases, consumer advocates worry that more homeowners will be vulnerable to fraud.
"Our state has taken a good first step toward protecting Floridians from unscrupulous fraud artists who prey on those most vulnerable to the current downturn in housing and credit markets," said Lori Parham, AARP's Florida state director.
The Foreclosure Rescue Fraud Prevention Act of 2008 will go into effect October 1.
Congress stalled
Congress has been considering federal legislation but the White House threatens a veto.
The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), authored by Rep. Barney Frank (D-MA), is aimed at expanding federal programs available to distressed homeowners. The White House says the plan rewards speculators and and lenders who make shaky loans.
Frank disagrees, saying the legislation combines a number of bipartisan bills including measures to modernize the Federal Housing Administration, which he says will provide crucial liquidity to the mortgage markets. He says it would also strengthen regulation and oversight for the future.
Frank and other Democrats say the housing package would help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process. Though the measure passed the full House last week, it failed to gain a veto-proof margin.
The Bush Administration said it would be willing to compromise with Democrats to come up with a bill acceptable to both sides. In an interview with Reuters, acting Housing and Urban Development Secretary Roy Bernardi said he believes there's room to come together.
In a speech last week, Federal Reserve Board Chairman Ben Bernanke appeared to signal support for stronger medicine than that prescribed by the White House. He recommended a number of measures contained in the House bill, and called on lenders to voluntarily write down a portion of their troubled mortgages.
Frank says his bill expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government -insured mortgages they can afford to repay. He says the legislation will help troubled borrowers avoid foreclosure while minimizing taxpayer exposure.
Frank also said the plan is limited to primary residences, and that no speculators, investment properties, second or third homes would be refinanced.
