Massachusetts Attorney General Permenantly Bans Foreclosure Rescue Transactions

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September 04, 2007 -- BOSTON – Massachusetts Attorney General Martha Coakley has filed a regulation with the Secretary of State’s Office that permanently bans for-profit foreclosure rescue transactions in the Commonwealth. The Massachusetts Consumer Protection Act authorizes the Attorney General to promulgate regulations to identify unfair or deceptive conduct that violates the act. The new regulation prohibits predatory, for-profit foreclosure rescue transactions. Foreclosure rescue transactions between family members or arranged by a non-profit community or housing organization are not banned under this regulation. The new regulation also makes it an unfair or deceptive act to market foreclosure-related services without a precise description of how the promoter will assist persons in avoiding or delaying foreclosure. The regulations define a “Foreclosure Rescue Transaction” as a transaction designed to avoid foreclosure and where the homeowner transferring the property maintains an option to reacquire the home by maintaining a legal interest in the home.

“Our office is pleased that this regulation is now permanent,” said Attorney General Martha Coakley. “We are one step closer to ensuring that distressed homeowners are protected from unscrupulous business practices.”

On June 1st, Attorney General Coakley announced emergency regulations that placed a temporary ban on these types of unfair and deceptive foreclosure rescue schemes as part of her multi-faceted plan to address the foreclosure rescue crisis in Massachusetts. The regulations went into effect immediately and were valid for 90-days. After a public hearing held on Thursday, August 30, in Boston, the regulations were promulgated as final.

Foreclosure rescue schemes are typically initiated when businesses or professionals claim to assist consumers who are facing foreclosure by convincing them to convey their property to straw purchasers. The straw purchasers then obtain mortgage loans, permitting the individuals facing foreclosure to continue living in their property for a limited time, and promising the individuals that they will be able to later reacquire their homes. In the enforcement matters litigated by the Attorney General, the promises of maintaining home ownership are illusory and homeowners lose their home to the so-called “rescuer.”

In addition, Attorney General Coakley announced earlier this month regulations to address unfair and deceptive tactics used in the mortgage industry. Hearings will be held across the state on the proposed regulations during September. The Attorney General’s Office anticipates that final promulgation of these regulations will occur by the end of September 2007.

Source: Massachusetts Attorney General