Monday, May 24, 2010

New mortgage laws better protect homeowners

My Turn

By Terry Goddard
Arizona Attorney General

Arizona will soon have two new laws that I fought for this session to help crack down on deceptive and predatory lending businesses that prey on struggling homeowners.

The measures will take effect July 29.

A key priority for my Office was the elimination of upfront fees for mortgage modifications. SB1130, sponsored by Sen. John Nelson, does just that. Prior to the passage of this bill, mortgage modification advisers could exploit homeowners’ by charging enormous upfront fees and preying on their fears over the risk of foreclosure.

The new law bans upfront fees, but requires foreclosure consultants to fully disclose the terms and costs of their services. It also provides an important three-day right of cancellation. Violators who engage in fraud or deceit now can be found guilty of a Class 1 misdemeanor.

I also called for a new law to protect seniors from scams associated with reverse mortgages. HB 2242, sponsored by Rep. Bill Konopnicki, extends the protection currently under federal law to a new class of reverse mortgages.

A reverse mortgage lets the homeowner convert a portion of the home’s equity into cash and typically requires no repayment for as long as the homeowner lives in the home. The cash can be paid to the homeowner all at once, as a regular monthly advance, or at times and in amounts agreed to by the homeowner and creditor. These loans can be helpful to cash-strapped homeowners, if the terms are fair and fully understandable.

Under the new law, homeowners now must get better information explaining the mortgage in detail before they can be bound to the mortgage terms. In addition, the law ensures that the borrower not pay any unnecessary costs for obtaining the reverse mortgage, including any costs of estate planning, financial advice or related fees.

With these two new laws on the books, Arizona has more tools in the fight against mortgage scams that have hurt both homeowners and the housing market. Protecting Arizona residents and keeping them in their homes helps stabilize our communities and neighborhoods. I have instructed my prosecutors to be vigilant in prosecuting bad actors and fraudulent foreclosure “rescue” businesses that seek to rip off homeowners.

While the legislature did other things this session that set Arizona back in many ways, I’m pleased with my Office’s legislative efforts to protect Arizona homeowners in these economically challenging times.

1 comment:

Sara said...

Hi Terry,

It's really great to note that there won't be any upfront fees charged to the home owners in Arizona while they go for a loan modification. The enormous fees that the loan modification companies charge the home owners actually forces them to the brink of foreclosure. The best part of the new law is that it offers a three-day right of cancellation to the home owners.

The law regarding reverse mortgage is also a welcome move. If the lender explains the reverse mortgage plan in details, it will be easier for the senior home owners to know the pros and cons of it. With the coming of the new law, unnecessary costs can be avoided by the seniors and there would be less chances of a scam.

All in all, it's a great move!!!