Maryland Bill Attacks Scams In Foreclosure Consulting
Saturday, April 9, 2005
Maryland's General Assembly appears close to passing legislation that supporters say would be one of the toughest responses in the nation to con artists who promise to rescue desperate homeowners from foreclosure but end up getting title to the house and turning the owners into tenants.
The House this week passed a version in a 130 to 0 vote. The Senate passed a similar version 47 to 0 on March 22. The sponsors were optimistic that the versions could be reconciled and a bill sent to the governor over the weekend; the session ends Monday.
Gov. Robert L. Ehrlich Jr. (R) has taken no position on the bill, but a state regulatory agency has said some legislation is needed. The Maryland Bankers Association and the Maryland Association of Realtors backed the House proposal after amendments exempted those with a legitimate interest in foreclosure sales from most provisions.
The bill "places Maryland among only a few states that have quickly responded to the unconscionable and fraudulent activity of these so-called foreclosure consultants," said Diane Cipollone of the Community Law Center in Baltimore. "The elderly and minorities who have equity in their homes are targeted [by those who advertise themselves as foreclosure consultants] and end up as tenants in their own homes by this deed theft."
The bill was offered by Sen. Brian E. Frosh (D-Montgomery) and Del. Doyle L. Niemann (D-Prince George's). Niemann said he introduced the measure after he ran into the issue in his day job as an assistant state's attorney. He heard an increasing number of complaints from Washington area homeowners who claimed to have been tricked out of their houses by those who said they would help avoid foreclosure. The homeowners either knowingly or unknowingly sign over their titles, thinking they will be able to repurchase later, but then learn that they cannot afford the new price and that they have sold their homes for the back payments owed and not the market value of the property.
The state's attorney's office in Prince George's County is investigating a half-dozen such complaints, Niemann said. State regulators at the Department of Labor, Licensing and Regulation have also issued warnings about scams.
Reports of similar problems have mushroomed across the country in the past two years, according to consumer advocates and regulators, as hundreds of thousands of homeowners face foreclosure even though home values have skyrocketed.
"What you're seeing is the return of an old scam," said Ira Rheingold, executive director of the National Association of Consumer Advocates. "It happened a lot in the '70s and then seems to have dissipated for a while. Now it's something we're seeing everywhere."
"People are so desperate to keep their homes -- even though they're in foreclosure and they know instinctively that they should sell their homes -- that they get conned by these people," said Minnesota Attorney General Mike Hatch (D), who lobbied for the law in his state last year.
The Maryland bill is based in part on the Minnesota law, but it goes much further, Niemann said.
If a consultant "promises to do certain things, more than just advice, we require that those contracts be in writing and to specify exactly what the consultant will do and what he will charge," Niemann said. "And if there is a sale involved, that has to be specified as well."
If the consultant promises to let the homeowner repurchase the property, that must also be in writing, with the purchase price spelled out.
If the repurchase agreement falls apart within 18 months, whoever buys the house must give the homeowner 82 percent of the equity in the house, minus their expenses, Niemann said. That language is the heart of the Minnesota bill.
"This is going to make a huge difference," Niemann said. "As people become more aware of it, it's going to put out of business all of the people that lie, and there's a lot of them."
Sponsors of a bill to crack down on fraudulent foreclosure consultants hoped to send the legislation to Maryland Gov. Robert L. Ehrlich Jr. during the weekend.