Foreclosure Rescue Scheme Banned in Massachusetts
Massachusetts Attorney General Martha Coakley is a hero to her state's homeowners.
Coakley took emergency action against schemes that take advantage of homeowners who are in financial distress. On June 1, she filed a regulation with the Secretary of State's Office that banned for-profit foreclosure rescue transactions in the state.
The regulation went into effect immediately and was effective for 90 days. On August 30th, there was a public hearing on the matter and the foreclosure rescue ban became permanent.
The Attorney General is given the authority to put the emergency ban into effect by The Massachusetts Consumer Protection Act. Under the Act, Coakley may introduce and put into effect regulations which identify unfair or deceptive conduct by a business that violates the act, and she did just that by banning for-profit foreclosure rescue schemes.
The new regulation comes after a statewide spike in foreclosure rates and strictly prohibits predatory, for-profit foreclosure rescue transactions. Many homeowners facing bankruptcy and foreclosure have been taken advantage of by such schemes in the past and lost both their money and homes.
Coakley's new regulation does not put a ban foreclosure rescues by non-profit community or housing organizations or foreclosure rescue transactions between family members. The regulation is meant to stop predators from taking advantage of homeowners in desperate financial situations, but not to stop homeowners from getting help in keeping their homes from sources where it is actually available to them.
"Foreclosure Rescue Transaction" is defined by the new regulation as a transaction designed to avoid foreclosure and where the homeowner transferring the property maintains an option to reacquire the home by maintaining a legal interest in the home.
In the past, unscrupulous organizations would prey on homeowners who are facing filing bankruptcy and foreclosure and approach them with an offer of help, but at a steep price. Often these schemers would tell the homeowners that if they paid up, the schemer would be able to stop the bank foreclosure in its tracks.
These schemers were not attorneys or bank lenders. In some of the schemes, homeowners were told to actually sign over their homes to straw purchasers in order to save them. The straw purchaser would obtain a mortgage on the property and allow the homeowners to stay in the home for a limited amount of time.
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The homeowners were promised the chance to actually own their homes again at a later date. More often than not, the homeowners would then lose the money paid to the schemer and also their homes.
This type of activity is what Coakley's new regulation is intended to halt.
The regulation is the first step in a plan to address the foreclosure rescue crisis in Massachusetts. The Attorney General's Office is also is putting together a group of private attorneys who will work for free to help homeowners facing foreclosure.
Attorney General Coakley also announced regulations to address unfair and deceptive tactics used in the mortgage industry.
Hearings will be held across the state on the proposed regulations this month. The Attorney General's Office anticipates that final implementation of these regulations will be complete by the end of September.