New York has a new law on the books aimed at fraudulent foreclosure rescue scams that trick homeowners into signing their deeds over without compensating them for the equity they’ve accrued in their homes.
The Home Equity Theft Prevention Act, which becomes effective Feb. 1, 2007, requires written contracts fully disclosing the terms of sales of homes in foreclosure. The law gives sellers five days to change their minds for any reason. Homeowners also have up to two years to have a sale cancelled if they can prove the purchaser violated the law, although that provision does not apply to subsequent buyers.
The new law also applies to sales in which homeowners are promised they can get their homes back through a reconveyance arrangement. The Home Equity Theft Prevention Act, however, is not binding on purchasers who buy a home that’s in default as a primary residence.
An attorney who’s represented dozens of victims of foreclosure rescue scams, William Friedman, told New York Newsday that the law’s disclosure requirements will do little for potential victims because they are often too desperate to read contracts closely.
But Sarah Ludwig, a spokeswoman for a nonprofit fair-housing group, told Newsday the law would “completely transform the way business is conducted when people are in foreclosure.”
California, Minnesota, Maryland and Illinois have passed similar laws.