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§501.1377 Foreclosure Fraud

Presented by: David C. Agee, Esq. Reid & Agee, PLLC 3633 26 th Street West Bradenton, Florida. §501.1377 Foreclosure Fraud. §501.1377 Foreclosure Fraud Statute or the “Please Kill a Few More Trees Statute ”. What is it?

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§501.1377 Foreclosure Fraud

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  1. Presented by: David C. Agee, Esq. Reid & Agee, PLLC 3633 26th Street West Bradenton, Florida §501.1377 Foreclosure Fraud

  2. §501.1377 Foreclosure Fraud Statute or the “Please Kill a Few More Trees Statute” • What is it? • Designed to prevent consumers from being taken advantage of by the forces of evil! FORCES OF EVIL

  3. §501.1377 “Foreclosure Fraud Statute” • Effective Date: October 1, 2008 • Are you in Compliance? • A person who violates any provision of this section commits an unfair and deceptive trade practice …Violators are subject to the penalties and remedies provided in part II of this chapter, including a monetary penalty not to exceed $15,000 per violation.

  4. §501.1377 “Foreclosure Fraud Statute” • WHAT IS IT?: • Two Part Statute: • Part One: Regulates what it calls ‘Foreclosure Rescue Consultants and creates contractual requirements • Part Two Imposes contractual requirements for ‘Foreclosure Rescue Transactions’ • Imposes a fine of $15,000.00 for failure to comply with its provisions

  5. PART ONE- Definition of a Foreclosure Rescue Consultant • Foreclosure-rescue consultant • a person who directly or indirectly makes: • a solicitation, • representation, • or offer

  6. PART ONE: FORECLOSURE RESCUE CONSULTANT (cont) • There are exceptions to the definition: • A Person acting under the authority of HUD, agency of the US, or an agency of the state • The Homeowner • A mortgagee with a lien on the property • A financial institution • Licensed Mortgage Broker • Someone excluded under §501.212

  7. PART ONE: FORECLOSURE RESCUE CONSULTANT (cont) • PART ONE • To a homeowner • to provide or perform, foreclosure-related rescue services in return for payment of money or other valuable consideration,

  8. PART ONE: Foreclosure Rescue Services Defined • foreclosure-related rescue services. • (c) …means any good or service related to, or promising assistance in connection with: THINK: LISTING AGREEMENT

  9. PART ONE: Foreclosure Rescue Services Defined • 1. Stopping, avoiding, or delaying foreclosure proceedings concerning residential real property; or • Reinstatement • Work out agreement • Deed in Lieu of Foreclosure THINK: SHORT SALE

  10. PART ONE: Foreclosure Rescue Services Defined • foreclosure proceedings • means residential real property against which there is an outstanding notice of the pendency of foreclosure proceedings recorded pursuant to Section 48.23, Florida Statutes. 48.23 THINK: LIS PENDENS

  11. PART ONE: Foreclosure Rescue Services Defined • Residential real property means real property consisting of one-family to four-family dwelling units, one of which is occupied by the owner as his or her principal place of residence. THINK: HOMESTEAD

  12. PART ONE: Foreclosure Rescue Services Defined • OR

  13. PART ONE: Foreclosure Rescue Services Defined • 2. Curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation. • Short Sale • Reinstatement • Work out agreement • Deed in Lieu of Foreclosure THINK: KITCHEN SINK

  14. PART ONE: Foreclosure Rescue Services Defined Default on Mortgage Obligation is broader than simply non-payment. It includes: • Failure to pay taxes • Failure to pay flood or casualty insurance • Committing waste on the property • Transferring the property to a 3rd party without consent of the mortgagee • Failure to comply with any other mortgage covenant

  15. PART ONE: §501.1377 Foreclosure Fraud Statute • Part One of the statute applies to any service that offers to help the owner of owner occupied property who has is in foreclosure or who is or may end up in mortgage default by providing services aimed at curing the default or stopping or delaying a foreclosure. RECAP:

  16. PART ONE: §501.1377 Foreclosure Fraud Statute • The statute only applies to homestead property. It doesn’t apply to non-owner occupied property whether residential or commercial in nature. RECAP: THINK: INVESTORS

  17. PART ONE: §501.1377 Foreclosure Fraud Statute • Realtors who are involved or who find themselves involved in the sale of distressed homestead property are considered Foreclosure Rescue Consultants and failure to comply is costly.

  18. PART ONE: Compliance • Compliance is simple • (3) Prohibited acts.--In the course of offering or providing foreclosure-related rescue services, a foreclosure-rescue consultant may not:

  19. PART ONE: Compliance • (a) Engage in or initiate foreclosure-related rescue services without first executing a written agreement with the homeowner for foreclosure-related rescue services; or

  20. PART ONE: Compliance • (b) Solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services before completing or performing all services contained in the agreement for foreclosure-related rescue services.

  21. PART ONE: Compliance is simple THINK: AMENDED LISTING AGREEMENT • Enter into a written agreement that complies with the statute before performing any service which may avoid, delay, or stop foreclosure proceedings or cure a default • Don’t call lenders or attorneys on behalf of the Seller before hand • Don’t obtain pay offs on behalf of the Seller before hand • Don’t do any marketing property on behalf of the Seller before hand

  22. PART ONE: Compliance THINK: NO CLOSING - NO MONEY • Compliance is simple • Don’t accept or collect any up front fees of any kind PERIOD until the Closing of the Transaction. • No Marketing Fees • No Administrative Fees • No Advance Commission Fees • Placing money in escrow to avoid the ‘collection clause’ is a violation of the statute, don’t do it.

  23. PART ONE: Written Agreement • (4) Foreclosure-related rescue services; written agreement.— • (a) The written agreement for foreclosure-related rescue services must be printed in at least 12-point uppercase type and signed by both parties. • The foreclosure-rescue consultant must give the homeowner a copy of the agreement to review not less than 1 business day before the homeowner is to sign the agreement.

  24. PART ONE: Written Agreement • The agreement must include the name and address of the person providing foreclosure-related rescue services, …

  25. PART ONE: Written Agreement • the exact nature and specific detail of each service to be provided, • Will you only market the house or will you have contact with the Lender(s) or Attorney(s)? • Will the homeowner look to you for legal or tax advice? • Will you be negotiating with the Lender on behalf of the Seller or will a loss mitigator be involved?

  26. PART ONE: Written AgreementIdentify the Specific Details • If you will be negotiating: • What is the scope of your negotiating authority? • Unlicensed Practice of Law issues • Advising on the effect of legal proceedings • Advising on the rights of a lender to deficiency • Advising on the availability of Bankruptcy • Advising on the legal consequences of a Deed in Lieu of Foreclosure or release with recourse. • Advising on or evaluating the terms of a deficiency or renewal note • Drafting or helping to draft hardship letters

  27. PART ONE: Written AgreementIdentify the Specific Details • If you will not be negotiating with the Lender on behalf of the Seller: • Who will hire the loss mitigator, you or the homeowner? • If you hire the loss mitigator, how will the mitigation company be paid? Out of your commission or as a fee which must be reimbursed by the Seller or its Bank • MLS Commission Confusion

  28. PART ONE: Written AgreementIdentify the Specific Details • If you choose to hire the loss mitigator, • You should verify that the mitigator is authorized to act as a loss mitigator, Mortgage Delinquency or Default or credit counselor • Be aware of the Non-Profit options available to homeowners and the HUD approved Counseling Agencies

  29. PART ONE: Written AgreementIdentify the Specific Details HUD.GOV http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webListAction=search&searchstate=FL

  30. PART ONE: Written AgreementIdentify the Specific Details • The written agreement should state that you are authorized to hire a loss mitigator, if the homeowner will be responsible for this independent of you, the agreement should so indicate. • The agreement should also identify what fee will be charged for loss mitigation if any.

  31. PART ONE: Written AgreementIdentify the Specific Details • The agreement should set forth clearly the total amount and terms of charges to be paid by the homeowner for the services • the agreement must be dated

  32. PART ONE: Written AgreementIdentify the Specific Details • The homeowner must be given the right to cancel the agreement without any penalty or obligation if the homeowner cancels the agreement within three business days after signing the agreement. • The homeowner's right to cancel cannot be limited or waived.

  33. PART ONE: Written AgreementIdentify the Specific Details • If the homeowner cancels the agreement, any payments that have been given to the foreclosure-rescue consultant must be returned to the homeowner within 10 business days after receipt of the notice of cancellation.

  34. PART ONE: Written AgreementIdentify the Specific Details • 4(c) An agreement for foreclosure-related rescue services must contain, immediately above the signature line, a statement in at least 12-point uppercase type that substantially complies with the following:

  35. PART ONE: Written AgreementIdentify the Specific Details • HOMEOWNER'S RIGHT OF CANCELLATION YOU MAY CANCEL THIS AGREEMENT FOR FORECLOSURE-RELATED RESCUE SERVICES WITHOUT ANY PENALTY OR OBLIGATION WITHIN 3 BUSINESS DAYS FOLLOWING THE DATE THIS AGREEMENT IS SIGNED BY YOU.

  36. PART ONE: Written AgreementIdentify the Specific Details • THE FORECLOSURE-RESCUE CONSULTANT IS PROHIBITED BY LAW FROM ACCEPTING ANY MONEY, PROPERTY, OR OTHER FORM OF PAYMENT FROM YOU UNTIL ALL PROMISED SERVICES ARE COMPLETE. IF FOR ANY REASON YOU HAVE PAID THE CONSULTANT BEFORE CANCELLATION, YOUR PAYMENT MUST BE RETURNED TO YOU NO LATER THAN 10 BUSINESS DAYS AFTER THE CONSULTANT RECEIVES YOUR CANCELLATION NOTICE.

  37. PART ONE: Written AgreementIdentify the Specific Details • TO CANCEL THIS AGREEMENT, A SIGNED AND DATED COPY OF A STATEMENT THAT YOU ARE CANCELING THE AGREEMENT SHOULD BE MAILED (POSTMARKED) OR DELIVERED TO ................ (NAME) AT ...............(ADDRESS) NO LATER THAN MIDNIGHT OF ...........(DATE).

  38. PART ONE: Written AgreementIdentify the Specific Details • IMPORTANT: IT IS RECOMMENDED THAT YOU CONTACT YOUR LENDER OR MORTGAGE SERVICER BEFORE SIGNING THIS AGREEMENT. YOUR LENDER OR MORTGAGE SERVICER MAY BE WILLING TO NEGOTIATE A PAYMENT PLAN OR A RESTRUCTURING WITH YOU FREE OF CHARGE.

  39. PART ONE: Written AgreementIdentify the Specific Details • 4(e) The foreclosure-rescue consultant must give the homeowner a copy of the signed agreement within 3 hours after the homeowner signs the agreement.

  40. PART ONE: §501.1377 Written Agreement • When dealing with distressed homestead property, get a Written Agreement • The Agreement must contain the Following: • Date of the Agreement (include a time) • Your Name and Address RECAP:

  41. PART ONE: §501.1377 Written Agreement RECAP: • Provide at least 3 day Cooling off Period • Identify the specific services to be provided • Identify the fee that will be charged for the services • Provide a copy of the executed agreement within 3 hours of its execution (have the client acknowledge receipt)

  42. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined RESCUE TRANSACTION

  43. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 2(d) “Foreclosure-rescue transaction” means a transaction: • 1. By which residential real property in foreclosure is conveyed to an equity purchaser…

  44. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 2(a) “Equity purchaser” means any person who acquires a legal, equitable, or beneficial ownership interest in any residential real property as a result of a foreclosure-rescue transaction. Subject to certain exceptions:

  45. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • The Following Transactions Are Exempt: • a person who acquires the legal, equitable, or beneficial interest in property: • 1. By a certificate of title from a foreclosure sale conducted under chapter 45; • Purchases at the courthouse or through the REO Process are not affected by this Statute

  46. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • The Following Transactions Are Exempt: • a person who acquires the legal, equitable, or beneficial interest in property: • 1. By a certificate of title from a foreclosure sale conducted under chapter 45; • Purchases at the courthouse or through the REO Process are not affected by this Statute

  47. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 2. At a sale of property authorized by statute; • Tax Sales would not be subject to these provisions

  48. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 3. By order or judgment of any court; • Bankruptcy Trustees can sell to Buyers who are not subject to this Statute provided there was Court approval for the Sale • Probates are not affected by this Rule

  49. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 4. From a spouse, parent, grandparent, child, grandchild, or sibling of the person or the person's spouse; or • Family members are not affected by this statute and can freely enter foreclosure rescue transactions

  50. PART TWO: §501.1377(2)(d): Foreclosure Rescue Transaction Defined • 5. As a deed in lieu of foreclosure, a workout agreement, a bankruptcy plan, or any other agreement between a foreclosing lender and a homeowner. • If you didn’t catch it the first time, Lenders are exempt from the provisions of this statute

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