Florida To Prosecute ‘Rescue Foreclosure’ Mortgage Scams

TALLAHASSEE, Fla. – Jan. 23, 2008 –Attorney General Bill McCollum today announced a multi-pronged initiative to combat mortgage-related fraud, specifically fraud involving “rescue foreclosure” scams. As part of the litigation and legislation-based initiative, McCollum filed a lawsuit asserting South Florida-based National Foreclosure Management and multiple affiliates defrauded at least 80 homeowners out of approximately $1.7 million in home equity.

Sen. Mike Fasano (R-New Port Richey) and Rep. Clay Ford (R-Pensacola) also unveiled new legislative proposals yesterday to crack down on mortgage rescue scams.

Beginning in October 2004, National Foreclosure Management – which now does business as American Home Rescue Inc. – selected homeowners who had substantial equity in their homes but were in the foreclosure process. According to the lawsuit, the company would offer to hold the titles to the homes for a year, refinance the debt, and provide cash and credit repair counseling to the homeowner, all while allowing the homeowner to remain in the house. The company claimed it would deed the property back at the end of the year after the foreclosure had been avoided and the homeowner’s credit repaired.

Once the company had obtained the title to the house, the lawsuit alleges that the company would strip the equity from the homes by refinancing them at inflated prices and by assessing fraudulent fees and costs, leaving little or nothing for the homeowner to recoup. The home would then be sold outright to an investor or a straw buyer who would lease the home back to the homeowner at a rental rate far exceeding the original mortgage payment, virtually ensuring the homeowner’s eventual eviction. According to the lawsuit, the homeowners would end up with neither the titles to the homes nor the equity that rightfully belonged to them.

The lawsuit, filed with the Office of Financial Regulation, seeks restitution to the affected homeowners, dissolution of the rescue foreclosure companies, and revocation of the mortgage brokers’ licenses.

“Mortgage fraud is a destructive crime that can destroy a family’s future in an instant, and we need stronger laws to protect Florida’s consumers,” said Chief Financial Officer Alex Sink, who oversees the Department of Financial Services and who heralded today’s actions as essential to the fight against mortgage-related fraud. “It is downright disgraceful that some would use trickery to steal the dream of homeownership from a struggling Floridian.”

The proposed legislation – SB 992 and HB 643 – offers the following provisions:

• A five-day right of cancellation period that allows a consumer to cancel the agreement with the foreclosure rescuer

• Requires that foreclosure rescuers include in the contract clear and conspicuous notice to homeowners of this right of cancellation, as well as a recommendation that the homeowner contact the lender or mortgage servicer prior to the signing of the agreement, and a provision that states the consultant is prohibited from accepting any form of payment until all services are completed

• Defines terms such as “Equity Purchaser,” “Foreclosure Consultant,” “Foreclosure-related Services” and “Foreclosure Rescue Transaction”

• Creates penalties, defining violations as unfair and deceptive trade practices subject to the penalties included in Part II of Chapter 501, Florida Statutes.

© 2008 FLORIDA ASSOCIATION OF REALTORS®
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Foreclosures: Florida Up Slightly

IRVINE, Calif. – May 15, 2007 – Florida reported one foreclosure filing for every 510 households, and was seventh highest among the states, according to RealtyTrac. The state’s foreclosure activity increased less than 1 percent since March but was up nearly 72 percent from April 2006.

Nationally, the April 2007 U.S. Foreclosure Market Report shows a total of 147,708 foreclosure filings nationwide – default notices, auction sale notices and bank repossessions – reported during the month, down about 1 percent from the previous month but up 62 percent from April 2006. The report shows a national foreclosure rate of one foreclosure filing for every 783 U.S. households during the month. “After hitting a two-year high in March, U.S. foreclosure activity slipped slightly lower in April,” says James J. Saccacio, chief executive officer of RealtyTrac. “Last year, foreclosure activity subsided somewhat during the spring and summer months, thanks in part to increased interest from buyers. Whether the decrease in April is the beginning of a similar trend this year remains to be seen, but we expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years – many in the subprime market – and slowing home price appreciation.”

States with foreclosure rates (percentage) ranking among the nation's 10 highest in April were Nevada, Colorado, Connecticut, California, Ohio, Georgia, Florida, Arizona, Illinois and Michigan. In total number of foreclosures, Florida ranked second to California. States with foreclosure totals among the nation’s 10 highest in April were Ohio, Texas, Illinois, Georgia, Michigan, Colorado, Connecticut and Arizona.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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