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Florida's Foreclosure Fraud law HB 643, confusing to say the least

By Rob Arnold

Real Estate Agent with Sand Dollar Realty Group, Inc. BK627826

June 09, 2008 02:27 PM

I have read through this foreclosure fraud law about 5 times now and discussed this at length with several knowledgeable people including attorneys, Realtors, a mortgage broker, and an investor that is a "short sale specialist." Here is a link to the new law. I am glad for the lievely discussion in my previous post. It helps me to better interpret the law for myself. It seems this law provides far more questions than answers. The definitions are screwy and the exemptions are even screwier. Are attorneys exempt or aren't they? Are Realtors and appraisers exempt or aren't they? Are buyers exempt in a short sale situation where the homeowner and bank sign off on the deal? Does anybody working a transaction need to check the title every time they sign a new agreement or an addendum with the homeowner? It really is hard for me to say, but I question if any of these parties are fully exempt from this law.

After all these discussions about this new foreclosure law, I did in fact make a call to the Florida Association of Realtor's (FAR) legal hotline. I wanted to know what their thoughts were on this very controversial and confusing law. I hate to say this, but the attorney that I spoke with told me that she had not heard of this new HB 643 foreclosure fraud law. Whoooa! Now I am really concerned. Hopefully some of her colleagues have heard of this and the whole bill did not completely fly under FAR's radar.

FAR is supposed to get back with me in a few days, so I will post info on whatever they tell me. So stay tuned ...

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Rob Arnold, ABR, CPL, CRB, GRI, Managing real estate broker, Licensed mortgage broker, Notary Public

407-389-7318 / 1-877-389-7318 www.SDRhouses.com/ www.WeBuyHousesFlorida.com/

Your full service and investor friendly Realtor in Orlando. Learn to invest in Central Florida real estate and Orlando real estate. Investor mentoring and counseling available. I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in most parts of Central & South Florida, the Space Coast, and the Treasure Coast including Orlando, Winter Park, Maitland, Ocoee, Winter Garden, Apopka, Altamonte Springs, Casselberry, Longwood, Winter Springs, Oviedo, Lake Mary, Sanford, Deltona, Debary, Deland, Mount Dora, Eustis, Clermont, Kissimmee, Winter Haven, Lakeland, Tampa, Sarasota, Bradenton, Miami-Dade, Fort Lauderdale, West Palm Beach, Port Saint Lucie, Melbourne, Daytona Beach, Ocala, Gainesville, Volusia, Brevard, and more.

We sell properties, list properties, and we buy houses cash throughout Central Florida and the metro Orlando area.

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Anonymous

Mike Wasylik

Rob, I can tell you that i have been consulting with a number of attorneys and most of us are concerned that we are not exempt under the plain language of the law - even though there are many excellent legal and policy reasons that we should be. I have not looked at the bill from the perspective of Realtors, but if mortgage brokers and lenders are exempt - and most of the foreclosure rescue scammers I've sued to date have been one of those - then so should attorneys and Realtors. I know that the attorneys in Florida who would be affected by this are planning action. I hope Realtors are as well. It's just shocking to me that FAR, the Bar, and everyone else whose job it is to watch that things like this don't happen, dropped the ball so badly. Some homeowners will be a little better off, but many will suffer, and it;s the banks who will benefit when homeowners have no professionals who are allowed to help them. Please keep information flowing about this issue. Mike

Jun 20, 2008 11:41 AM

Aslan Realty Advisors, LLC

Fort Myers, FL

Staying a step ahead with Pride!

“Here Is The Solution To Avoid Being Fined By The State Of Florida For Interacting With A Homeowner In Foreclosure.”

Discover the Fastest And Easiest Way To Immediately “Legalize” Your Real Estate Career!

Read This Information Carefully If You Are A

Real Estate Investor, Wholesaler*, Mortgage Broker, Realtor, Foreclosure-Rescue Consultant, or Short Sale Specialist.

*Additional Risk Factors

If You Are Any of These Real Estate Professionals,

You Are Likely Breaking Florida Law And

You Probably Don’t Even Know It!

Florida State Statute Section 501-1377 (“Foreclosure Rescue Transactions”) has become law and it is very clear; eithe r you comply or you violate the law. If you don’t have a legally qualifying Disclosure Document signed by the homeowner in foreclosure, and you follow strict contracting guidelines, your only hope of avoiding fines is waiting for the statute of limitations to expire.

Does this sound “over the hill”? It may, but is has been a reality since over a year ago with the passage of the first so called “anti-investor” legislation by the State of Florida. An even more explicit legislation was signed into law May 28^th, 2008 by Governor Crist. This Statute limits the way you can do business with homeowners who are contemplating or already in foreclosure. In addition to Florida, thirteen other states have passed investor “unfriendly” legislation and six other states and the Federal government are currently drafting legislation for possible passage this year!

The Florida Statute (Section 501-1377 “Foreclosure Rescue Transactions”) passed on May 28^th, 2008 replaces the previous legislation (Section 501.2078 “Violations involving individual homeowners during the course of residential foreclosure proceedings”). This earlier legislation is being repealed October 1, 2008 by the new Statute. This new law beefed-up regulation of the foreclosure industry and is specifically aimed at anyone interacting with homeowners in foreclosure by “offering to buy their foreclosure property, offering to postpone or “stop foreclosure”, anyone who charges an “up-front” fee for any related service to foreclosure or short sales, and anyone offering a lease option to a homeowner in foreclosure”. Included in the new legislation (s. 501.1377) are very specific clauses regarding the maximum profit on a lease option transaction, exact font size for certain “must have” clauses in your contracts or disclosures, a 3 day right-of-rescission, a required one day “preview” by the homeowner of all Contracts/Agreements”, restrictions on transactions involving land trusts, and much, much more!

You can no longer do foreclosure real estate investing or foreclosure “rescue” work in Florida without having proper disclosure documents without facing $15,000 fines per violation!

The Only Question Is: How Soon Will

You Be Caught And Fined?

Dear Fellow Real Estate Professional;

As a real estate investor for 33 years, we seem to be in a “perfect storm” of hard to get buyer loans, foreclosures seemingly without end, competition from many other investors, and now an attack on the industry by well-meaning legislators who may not realize the damage they may be inflicting on the investing community.

Despite all the additional economic problems at hand, people need homes to live in and our fundamental economic issues will pass but just how soon no one really knows. I have lived through two other serious real estate downturns in South Florida and history will repeat itself by the market returning to “normal” in the future.

This is a really unique time for anyone in real estate because prices are probably at 10 year lows and there are buyers out there. In other parts of the country, home prices have stabilized and are increasing slightly. As with all diversity, the people who make the most money have the foresight to buy when everyone else is selling.

Whether you are considering becoming an investor, realtor, mortgage broker, a wholesaler, or you plan to provide foreclosure related “rescue’ services for a fee, Florida’s new legislation must be dealt with before your next meeting with a perspective client!

To keep you from unintentionally violating the new law, we have worked with our group of attorneys to provide you with the actual disclosure documents that you need for every homeowner, whether they are in foreclosure or NOT in foreclosure.

Please take a few minutes and read the rest of this page so you better understand the seriousness of the legislation and its consequences for you. The solution at hand is to make your career in this industry one of great return versus having to look over your shoulder waiting to be served with a summons because of a document you didn’t have signed.

To your success,

Dave Dinkel, President

Heritage Realty Services, Inc.

What’s All The Fuss About?

Florida Senate Senator Mike Fasano, District 11

Press Release

FOR IMMEDIATE RELEASE
May 28, 2008

CONTACT: Greg Giordano
(727) 848-5885

Senator Fasano Announces that Governor Crist Has Signed
Foreclosure Rescue Fraud Legislation Into Law

Senator Mike Fasano announces that Governor Crist signed HB 643/ SB 992 into law today which places into statute many protections for individuals facing foreclosure. The legislation was a top priority of both Senator Fasano and Attorney General Bill McCollum.

In 2007 alone there were over 245,000 mortgage foreclosures in Florida. Additionally, Florida ranks second in the Nation only to California in the number of foreclosures in 2007.

A common practice of scam artists who pray on those facing foreclosure target homeowners trying to avoid closure by presenting themselves as foreclosure rescue counselors. The schemes perpetrated by these individuals include charging high fees for work the homeowner could do themselves; and a false bailout (where the homeowner is lead to believe that they can sell their home, rent it short-term and eventually repurchase the home).

The legislation protects consumers by informing them of their rights when they are entering into a contract with a foreclosure rescue entity and by including further protections for those who face foreclosure. It requires that foreclosure rescuers include in large bold font notification to homeowners of this right of cancellation on the contract and a recommendation that the homeowner contact the lender or mortgage holder prior to the signing of the agreement. It further informs the homeowner the consultant is prohibited from accepting any form of payment until all services are completed. Most importantly the bill creates a three-day right of cancellation for homeowners who sign a contract for foreclosure rescue services.

"The threat and fear of losing one's home has driven many people to unknowingly seek the services of unscrupulous foreclosure consultants," Senator Fasano states. "Passage of this legislation will ensure that those who decide to seek the help of a professional are given as many protections as the law will now allow to ensure that their rights as a homeowner are not infringed upon."

"Florida homeowners now have an important tool to protect their most valuable possession - their homes," said Attorney General McCollum. "By protecting our citizens who face the threat of foreclosure from those individuals who would prey on them, this law will ensure that homeowners will not be further victimized at a time of personal financial crisis."

The new law covers two categories of individuals/entities – the “Foreclosure-rescue Consultant” and the “Equity Purchaser”.

The Foreclosure-rescue Consultant is anyone “who directly or indirectly makes a solicitation, representation, or offer to a homeowner to perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services.”

The Equity Purchaser is anyone “who acquires a legal, equitable, or beneficial ownership interest in any residential real property as a result of a foreclosure-rescue transaction.”

If you deal with any homeowners in foreclosure to purchase their home, or offer any foreclosure related services, you are breaking the law if you don’t have the required Disclosure Documents signed by the homeowner – No “If, Ands or Buts”! Each violation is subject to a fine of up to $15,000.

Federal legislation is currently being drafted called the “Foreclosure Rescue Fraud Act of 2008” (S. 2888) which has one very onerous clause that sums up the intent of the legislation – “A Foreclosure Consultant is ANYONE who delays or helps a homeowner avoid a foreclosure, whether the Consultant charges a fee or not”. We are part of a lobby effort to have our industry be heard so that misguided legislation doesn’t do much more damage to an already fragile industry instead of targeting a few bad apples in the barrel!

Don’t expect a judge to listen to your plea of how much you helped the homeowner because “he would have lost his home if you hadn’t helped”. You have violated the law because you didn’t have the homeowner sign the REQUIRED Disclosure Documents so you are GUILTY – plain and simple. Don’t expect it to help if you drag the homeowner into court with you and have them plead for you, because you simply violated the law, no matter what the outcome for the homeowner. Doing a good deed can truly get you in real trouble if you don’t do it legally! Again, it’s completely black and white, either you did it right or you are guilty of breaking the law. Ironically, complying is very simple once you have the qualifying documentation.

NOTE - One requirement is that the homeowner must sign the receipt the day before they sign any contract with you and you must leave all the documents they will be signing with them to read overnight. The homeowner also has a 3 day “Right of Rescission” from the day they sign the documents and, if the homeowner cancels, any monies collected MUST be returned within ten days if the homeowner cancels.

Another major change that the legislation brings is that as a Foreclosure-rescue Consultant you can no longer charge an up-front fee for any “rescue-services” including short sales, loss mitigation negotiations, loan modifications, etc. Charging any up-front fee is completely illegal!

The Solution is Very Simple –

Get Every Client To Sign The Required

Disclosure Document

To Keep You Out Of Trouble!

Real estate “Wholesalers” are at highest risk because they have traditionally done a lot of work with homeowners in foreclosure. More importantly, when a wholesaler sells to another wholesaler who may sell to another wholesaler, who then sells to an “end” buyer, the entire “daisy chain” of assignors and assignees is at risk for the same non-disclosure violations.

So investors might say that you shouldn’t worry because the fine is only $15,000 per violation. However, based on the Statute, it is entirely possible to have 3 – 5 violations per deal. The problem gets even worse when you consider that wholesaler who does just 5 deals is involved with a potential “daisy chain” of buyers and sellers who could have violations and penalties of as much as $300,000 for each member of the wholesale chain. That’s figured by $15,000 x 2 violations/deal x 5 deals x 2 people in each “daisy chain” = $300,000!

Why haven’t you heard about this legislation before? I can’t tell you why, but I do know that a representative at the Attorney General’s Office said they called for comment from our industry and NO ONE came forward. This is the apathy we see in the industry because everyone only looks out for themselves. Before it is too late, it may be time to band together to support the lobbying effort that we have already become a part of for our industry. On our part, a portion of every sale we make goes into this direct lobbying effort.

With all this talk of “rules and regulations”, “doom and gloom” we could overlook the exceptional opportunity that exists with this legislation. For the faint hearted, the prospect of doing something unknown will deter them from entering or staying in the industry, resulting in less competition. The bad guys that caused all this knee-jerk legislation will be forced out of the business, resulting in even less competition. The ones who are left will police their local areas by turning in other investors who are not complying and once again, less competition. The survivors who take charge and get our Disclosure package for use with their clients will survive and thrive. You can be one of the survivors, the choice is yours!

My dad always said let’s look at the “Pros and Cons” of having a Disclosure Document, so here they are in the old Ben Franklin format:

PROS “Get the Disclosure Documents and be Legal”	CONS “No Problem, Let the Other Investors Worry About the Disclosures”
No worry about breaking the law with an attorney drafted disclosure – if you simply follow its intent.	Looking over your shoulder waiting for the “Shoe to Drop” and hoping the Statute of Limitations passes!
Confidence to make offers to Sellers that are profitable for you and are legal under Florida law.	Always wondering when an attorney will approach your Seller and tell him what a bad deal he got and what legal recourse he has – without a Disclosure you are automatically GUILTY!
More time looking at deals and feeling secure you can do them legally.	More time defending what you did for no additional return and always facing a tremendous loss of time and attorney’s fees!
Little chance of needing an attorney. In case of an investigation, you start by showing you complied with the current legislation	Huge attorney’s fees to defend yourself against State regulators and potential civil lawsuits!
If the Disclosure is done properly, very remote chance of being scrutinized for violations.	The stigma of the trial and the impact on your credit report if you lose! (Public records are on file for 20 years)
Stronger selling point with homeowner because he sees you are complying with the law. Adds credibility to your presentation and results in more deals.	Homeowner understands the law and is looking for you to “goof” and sue you – more of a chance than you might think as “ambulance chasing” attorneys rush to educate homeowners on their “rights”. The attorneys’ mailing list is the same Foreclosure List that you are using!
Peace of mind knowing that you are doing the right thing for the homeowner and you are doing it legally at the same time.	Never knowing when a former client will come out of the woodwork with an attorney or with an attorney from the Attorney General’s Office in tow to get money back from you!
As a wholesaler, no fear of having your buyers come back because you didn’t get a Disclosure signed or you were in the Daisy Chain that got caught – no problem.	Always knowing that someone in your “inner circle” of wholesalers will eventually get caught without Disclosures in place and everyone in the “daisy chain” will be a risk for the same problem because the original wholesale buyer didn’t take the time to get a Disclosure!
No need to worry about other investors “ratting” you out to get rid of you as a competitor because you did the right thing and got a signed Disclosure.	Always waiting for other investors to “rat” you out to the Attorney General’s Office because you simply didn’t get a simple disclosure Dcoument signed!

Sep 08, 2008 02:02 PM

Aslan Realty Advisors, LLC

Fort Myers, FL

Staying a step ahead with Pride!

That wasn't meant to be an advertisment....just found out about the law and this information seemed useful to me never mind they have a easy package already.

The Association here had NO idea about it much like your experience at with the legal hotline I'm finding not many people are aware what's going on.

Thanks for putting the information up, and if you've got more information please let me know!

Best Regards,

Paige Rausch

paige@gulfgatewayrealty.com

Sep 08, 2008 02:06 PM

Rob Arnold

Sand Dollar Realty Group, Inc. - Altamonte Springs, FL

Metro Orlando Full Service - Investor Friendly & F

Paige - No problem. I have posted some updates recently. Some local people here in Orlando had a chance to meet with Attorney General Bill McCollum to work on making techincal revisions to this law. Sort of clean it up and remove some of the ambiguities.

Sep 08, 2008 02:43 PM

Anonymous

That site for the disclosure documents above is www.RequiredFLDocs.com I bought my set a month ago and they are great! It even contains a disclosure to avoid the current "Anti-victimization" law F.S. 501.2078 that Florida's AG is already prosecting people. This statute is being replaced by the new one. Better be protected or suffer the consequences.

Robert Johnson,

Coral Springs

Sep 08, 2008 02:57 PM

Anonymous

Allison Ralph - Keller Williams Realty Professionals

I too spoke to somebody from FAR's legal hotline who told me that the legislation didn't apply to realtors, so they weren't going to do anything and that "anybody could read the statue and figure it out for themselves"!

Oct 30, 2008 06:26 AM

Rob Arnold

Sand Dollar Realty Group, Inc. - Altamonte Springs, FL

Metro Orlando Full Service - Investor Friendly & F

Allison - That's actually kind of funny because I have spoken to 2 different real estate lawyers on this subject. One is the counsel for our regional investment association and the other is the counsel for our regional Realtor(R) association. Both have stated in writing that there are gray areas in the law that could be cause for confusion for Realtors(R) especially if there are any odd negotiations going on in short sale situations.

Oct 30, 2008 06:35 AM