Measure Would Help Protect Distressed Homeowners from Unscrupulous Foreclosure Consultants
(TRENTON) — Legislation sponsored by Assembly members Gary S. Schaer, John J. Burzichelli, Bonnie Watson Coleman and Wayne P. DeAngelo to protect homeowners in jeopardy of foreclosure from ‘foreclosure rescue’ scams perpetrated by unscrupulous lenders and consultants was released Thursday from the Assembly Financial Institutions and Insurance committee by a vote of 5 to 0.
“Faced with the prospect of becoming homeless, many New Jersey homeowners are turning to foreclosure consultants and foreclosure rescue firms in a last-ditch effort to stay in their homes,” said Schaer (D-Passaic), the panel’s chair. “Unfortunately, some of the firms are nothing more than fronts for elaborate schemes to rob troubled homeowners of their hard-bought equity.”
The measure (A-359), entitled the “Foreclosure Rescue Fraud Prevention Act,” would establish specific practices that foreclosure consultants and other purchasers of distressed property would have to adhere to when contracting with New Jersey homeowners on the brink of foreclosure.
“These are desperate people looking for legitimate help to keep a roof over their heads,” said Burzichelli (D-Gloucester). “That we have to consider legislation to make sure they are not taken in by individuals looking to profit on the suffering of others is sickening.”
The sponsors said the measure stemmed from 2008 legal action initiated by the state Office of the Attorney General against numerous foreclosure rescue companies, mortgage loan providers, industry employees and lawyers for violating the state’s Consumer Fraud and RICO acts.
Under the bill, foreclosure rescue firms would be required to post a bond with the Division of Consumer Affairs before conducting business in the state. The firms also would be prohibited from collecting any payment prior to the completion of all contracted services.
“A person’s home is the single biggest purchase they will make and the single biggest investment they have,” said Watson Coleman (D-Mercer). “These scam artists know that and are intent on dangling false hope to homeowners teetering on the brink of financial collapse while taking them for literally everything they’re worth.”
The measure would set forth contract rights for property owners who utilize foreclosure rescue agents, giving residents broad rights to cancel the contract. It also would require foreclosure rescue agents to verify the property owner has a reasonable ability to repurchase the title on their property and fully disclose all costs the owner would incur in connection with the rescue contract.
Violators would be guilty of a third degree crime, with penalties of up to $15,000 in fines and five years in jail. Additionally, violators would face civil penalties of $10,000 for a first offense and $20,000 for all subsequent offenses.
“We want to make it perfectly clear that we are as serious about punishing these scam artists as we are about keeping distressed homeowners in their homes,” said DeAngelo (D-Mercer). “The last thing we need are individuals working to turn the American dream of homeownership into a nightmare.”
The measure now heads to the Assembly Speaker, who decides if and when to post it for a floor vote.
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