Mark Winston Griffith
“Thief! Drop that Home!”: Anti-Deed Theft Measure Becomes Law
As quietly as it's kept, last week George Pataki signed the Home Equity Theft Protection Act, legislation that could have a dramatic impact on the effort to curb real estate scams and abuses that have been ripping homes from the hands of homeowners, particularly those living in low and moderate income neighborhoods and communities of color. In a rare instance in which the mortgage lending industry, lawmakers of all stripes (the bill passed both state legislative houses unanimously) and foreclosure prevention advocates actually worked together to regulate the real estate industry, the passage of this bill was arguably the feel-good moment of the year for fair lending activism in New York.
The bill was inspired by the work of New Yorkers for Responsible Lending (NYRL), a coalition for 122 groups, which has been tracking and speaking out against deed theft for years now. Many of NYRL's member organizations have clients and members who have been targeted by deed theft, also known as "foreclosure rescue" scams. Deed theft typically involves financially embattled homeowners being tricked into signing over the ownership of their home, usually with the false promise that they will recover their home at a later date.
The new bill mandates that transactions involving the sale of a home in foreclosure must be executed with a written contract that includes the terms of the title transfer. It gives the "seller" five days to cancel the transaction, requires that they be given a written warning about deed theft scams, prohibits the purchaser from making false or misleading statements intended to defraud the homeowner, and establishes criminal penalties for violations of this law.
Parts of the legislation are similar to deed theft measures enacted in Illinois, California, Maryland and Minnesota. The Home Equity Theft Prevention Act follows on the heals of landmark anti-predatory lending legislation passed in New York State in 2002 which effectively clamped down on high-cost mortgage lending fraud and abuses, particularly in the home refinance market. New York can now claim some of the toughest legal safeguards against predatory real estate practices in the country.