Saturday, July 7, 2007

Is Foreclosure & Short Sale Regulation Coming to Your State?

I have been Fielding a lot of phone calls from my office about the rash of state mandatory regulation that have come down the pike recently concerning foreclosures and short sales. I have attached an article of the recent 90 day stay that AG of Massachusetts just recently put in place.

Massachusetts, like many other states have placed stays or regulations in place to protect the home owner from predatory lending. This does not effect the investor or should I say the ethical investor; risky bail out schemes and equity stripping is what these governmental organizations are targeting. Another no no is getting the the deed at the kitchen table, if your worried about the owner disappearing, have the deed held in escrow by an attorney!

As you can plainly see this will not effect us as investors as long as you cross your ts and dot your I (s).



June 1, 2007

(617) 727-2543

BOSTON - Attorney General Martha Coakley has formulated a multi-faceted plan to address the current foreclosure crisis in Massachusetts. The Attorney General’s office has issued emergency regulations under the Consumer Protection Act (Massachusetts General Laws Chapter 93A) to address the problem of so-called foreclosure rescue schemes, which have plagued the Commonwealth amid the current foreclosure crisis. The regulations will go into effect immediately and are valid for 90 days, at which point they may be permanently promulgated after public hearings. The Attorney General’s Office is also considering further amendments to current mortgage broker and mortgage lender regulations which would address widespread unfair and deceptive tactics used by some in the mortgage lending and brokering business, and is soliciting written comments from industry leaders, consumer advocates, and the public. In addition to the emergency regulations and other possible amendments to current regulations, the Attorney General’s Office is in the process of establishing a group of private attorneys who are willing to work pro bono to assist homeowners who are facing foreclosure.


“Our office has brought cases against several lenders, brokers, and lawyers who have carried out foreclosure rescue schemes, involving several versions of foreclosure rescue transactions. All are rife with fraud, and prey on vulnerable homeowners. These “rescuers” take a bad situation—foreclosure—and make it worse by liquidating any remaining equity in the homes to their own advantage and the homeowners’ detriment,” said Attorney General Coakley. “This practice has become widespread, and a new regulation under our Consumer Protection Act is the best way to quickly and proactively combat this problem and to prevent further harm to distressed homeowners.”

Attorney General Coakley announced emergency regulations, effective immediately, to prohibit unfair and deceptive foreclosure rescue schemes. As foreclosure proceedings have become more prevalent in Massachusetts, the Attorney General’s Office has seen an increase in unfair and deceptive foreclosure rescue transactions in the Commonwealth. These schemes are typically initiated when businesses or professionals claim to assist consumers who are facing foreclosure by convincing them to convey their property to straw purchasers. The straw purchasers then obtain mortgage loans, permitting the individuals facing foreclosure to continue living in their property for a limited time, and promising the individuals that they will be able to later reacquire their homes. In the enforcement matters litigated by the Attorney General, the promises of maintaining home ownership are illusory and homeowners lose their home to the so-called “rescuer.”

The Massachusetts Consumer Protection Act authorizes the Attorney General to promulgate regulations to identify unfair or deceptive conduct that violates the act. The emergency regulation prohibits foreclosure rescue transactions that are carried out for profit. It does not prohibit such transactions if they are not carried out for profit, such as transactions between family members or arranged by a non-profit community or housing organization. The regulation defines a “foreclosure rescue” transaction as a transaction (a) that is designed to avoid or delay foreclosure, and (b) where the homeowner transferring the home maintains a legal or equitable interest in the home, such as a lease interest or right to reacquire the property.


In addition to these emergency foreclosure rescue regulations, the Attorney General’s Office is also considering the proposal of further regulations aimed at preventing other problematic practices in the mortgage industry, all of which have contributed to the current foreclosure crisis in Massachusetts. During the course of enforcement investigations and litigation, the Attorney General’s Consumer Protection Division has identified several unfair and deceptive practices used by some mortgage brokers and lenders to process or make mortgage loans to Massachusetts borrowers. The problematic practices occur in purchase money mortgage loan transactions, as well as in those where the borrowers are refinancing an existing loan. The practices often result in consumers having mortgage loans they cannot afford, and thus contribute to the rise in foreclosures in the Commonwealth. These practices include:

• Mortgage brokers and lenders inflating the income of borrowers on application forms and misstating the source of the borrowers’ income;

• Mortgage brokers making mortgage loans which are not in the borrowers’ interests;

• Mortgage brokers and lenders processing and making mortgage loans without considering whether the borrowers can repay them;

• Mortgage lenders making mortgage loans which are not suited to the borrowers by evaluating criteria other than credit and bona fide credit qualification criteria; and

• Businesses being assigned predatory loans without allowing the borrowers the means of asserting claims against the assignees.

In order to address these problems, the Attorney General is considering amendments to existing Mortgage Brokers and Mortgage Lenders Regulations. Before doing so, the Attorney General’s Office is soliciting written comments from all interested parties. In particular, the Attorney General’s Office welcomes comments on the following issues:

• Whether the existing regulations should be expanded in scope to apply to purchase money mortgage loans, as well as loans that refinance an existing loan;

• Whether mortgage brokers and lenders should be prohibited from processing or making mortgage loans unless they reasonably believe that the borrower can repay the loan;

• Whether mortgage loans which are processed on a “no documentation” or limited documentation basis should be prohibited or restricted;

• Whether there should be a fiduciary duty standard, or similar standard, on mortgage brokers who arrange mortgage loans for clients;

• Whether lenders should be required to ensure that the loans they are providing to borrowers are suitable for the borrowers;

• Whether there should be assignee liability for all loans, or for certain types of loans, beyond the current standard applying only to “high cost” loans.

Both the Foreclosure Rescue Scheme emergency regulations and the Request for Comments concerning proposed amendments to the Mortgage Brokers and Mortgage Lenders Regulations, including a comment form, are available on the Attorney General’s web site,

The Attorney General’s Office will accept written comments concerning potential amendments to the Mortgage Brokers and Mortgage Lenders Regulations on or before June 28, 2007. Following the comment period, the Attorney General’s Office anticipates that any filing of proposed amendments to the Mortgage Brokers and Lenders Regulations will be followed by public hearings on those proposals.

The Foreclosure Rescue Scheme regulations are effective immediately as emergency regulations, and may remain in effect for 90 days. The Attorney General’s Office anticipates that those regulations also will be promulgated to take permanent effect. That process, including a public hearing, will likely occur during the summer. If homeowners or professionals have questions about the emergency foreclosure rescue regulations, they may call the Attorney General’s Consumer Protection Division during business hours at (617) 727-2200 extension 2574.