Last Friday Central Florida Realty Investors association put on a powerful discussion panel featuring Florida Deputy Attorney General John Pare', Mike Moore from the Florida Office of Financial Services, and 2 local real estate attorneys Bob Lerner and Joe Seagle. The room was packed with at least 100 people coming from as far away as Tampa and Fort Meyers.
This panel gave out a lot of true meat and potatoes as far as answering serious pertinent questions regarding the Florida Foreclosure Fraud Law FS 501.1377 as well as unlicensed activity by non-attorneys or real estate brokers.
Many of the questions from the audience were concerning the "equity purchaser" part of the law which effects subject to, sale/leaseback, and similar type transactions. However the Attorney General's office actually said that they have had very few complaints on those issues. The main complaints they are getting are on people charging upfront fees for short sales, loan modifications, and other foreclosure rescue type operations.
Deputy AG John Pare' stressed several times that if you are charging upfront fees for any of these services to someone in foreclosure that in their eyes you are breaking the law. He specifically stated that real estate brokers charging upfront or "retainer" fees for a short sale was a big no-no. He referenced for instance that during early 2008 that companies like Countrywide and Aurora were not negotiating at all, so how could anyone justify taking an upfront fee to work a short sale or loan modification on those deals when they wouldn't get anywhere on the negotiations.
Another problem they are seeing is companies hiring lawyers to work on their short sale or loan modification or foreclosure defense negotiations. The AG's office clearly stated that only homeowners can hire and pay these lawyers and not 3rd party companies. And likewise the attorney cannot pay out a referral fee to someone that referred them a customer. Additionally law firms that are located outside of Florida cannot be representing real estate transactions or homeowners unless the law firm has been admitted to the Florida Bar.
One question that I asked the panel is "Can an unlicensed person put a property under contract to purchase, then negotiate a short sale or loan modification for the owner (basically a 3rd party), and if successful assign or purchase the property?" Although I did not get a firm YES or NO answer, the answer I did get was that the reason why real estate brokers, mortgage brokers, and attorneys have licenses, continuing education requirements, surety bonds, etc. are to protect the public. The State of Florida is scrutinizing all these transactions very heavily for unlicensed activity and fraud.
I also was made aware that Attorney's Title Insurance Fund (Florida's largest title insurer) along with their strategic partner Old Republic Title just put the axe down on short sale double closings and options because they consider these deals to be potential loan fraud. I'm not sure if any title insurers still allow these anymore at least in Florida.
I've been saying for 2 years now that everything in the real estate and mortgage world is under a big microscope. Big Brother IS WATCHING YOU. I don't say this to scare people or make people angry. However, how many times a day do you get an email, a phone call, a postcard, a door hanger, or whatever from one of these short sale rescue, loan modification, etc. firms wanting to pay you referral fees or give you some sort of training? I must get at least 10 per day every day for the last year - and guess what, probably 90% of them are breaking the law in some way.
Be careful - this really is the new wild wild west.
Below are a few links if you want to read up further on this interesting discussion:
New Florida Statute FS 494.00296 a/k/a SB 2226 regarding mortgage brokers and lenders
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