Foreclosure Rescue Victim Awarded $700,000

Like a small number of states, Maryland has a tough law to protect homeowners against what are called foreclosure consultants or foreclosure rescue consultants. The idea is that “foreclosure rescue” is allowed in Maryland — but only if certain conditions are met.

Now a court has awarded more than $700,000 to a homeowner facing foreclosure under the state’s Protection of Homeowners Act.

Susan Spicer of Ellicott City was facing foreclosure. She owed $40,000 on her home.

“According to Spicer’s complaint,” reports the Baltimore Sun, “New Town and Royal Financial violated the state law by promising to allow her to stay in her foreclosed home — in which she had far more equity than her $40,000 mortgage debt — if she temporarily deeded the property to the lender while paying rent.

“But the lender sold the home for $265,000, reaping a $225,000 profit, and leaving Spicer with no equity, according to court documents.” (See: Court awards $700,000 to victim of foreclosure rescue scam July 19, 2010)

Huh? So what’s the problem?

Several years ago Maryland passed something called SB 761. “Under the bill,” according to the state, “a ‘foreclosure consultant’ is a person who makes a solicitation, representation, or offer to a homeowner at risk of foreclosure to perform, or who performs, one of a number of specified services that the person represents will help the homeowner. A ‘foreclosure purchaser’ is a person who acquires title or possession of a deed or other document to a residence in foreclosure as a result of a foreclosure reconveyance. A ‘foreclosure surplus purchaser’ is a person who acts as the acquirer by assignment, purchase, grant, or conveyance of the surplus resulting from a foreclosure sale.”

Excluded from the definition are such professionals as attorneys, real estate brokers and licensed mortgage lenders.

Maryland Rules

In basic terms, the bill sets out a number of requirements when buying a home from someone facing foreclosure:

  • A foreclosure consultant may not demand payment until after having performed all the services promised under the contract.
  • A foreclosure buyer may not offer to re-sell the property back to the original homeowner unless the purchaser verifies that the homeowner has the ability to afford a re-purchase.
  • The consultant may not accept a power of attorney from the homeowner for any purpose except to inspect documents.
  • A foreclosure consultant may not charge the homeowner more than 8% annually for any loan that the consultant makes to the homeowner.
  • If the property is re-sold within 18 months the original owner gets 82 percent of the profit.

The effect of the Maryland rule is to make foreclosure rescue lawful for those who follow the rules, illegal for those who do not, and not very profitable under any circumstances.

Oh, and what about those who violate the state rule? A violation can result in a penalty of as much as three years

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Posted in: Foreclosures

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