Mortgage Fraud - The Law

Beginning in 2010, any individual or company that provides loan modification services must have an active license from the Florida Office of Financial Regulation. This new provision further enhances the Foreclosure Rescue Fraud Prevention Act, which prohibits individuals and businesses from collecting up-front fees for loan modification services related to foreclosures.

In 2008, the Legislature enacted the original Foreclosure Rescue Fraud Prevention Act to specifically address foreclosure rescue businesses and their potentially abusive practices. The Foreclosure Rescue Fraud Prevention Act prohibits businesses or individuals from collecting up-front fees from the homeowner prior to completing all services contained in the contract. This includes foreclosure rescue services or loan modification services related to foreclosures.

The act also requires that a written contract must be executed by both parties before the consultant can initiate services. The contract must contain specific terms and conditions, a specific notice of the homeowner’s right to cancel and other disclosures. The law also provides that the repurchase price cannot be unconscionable. There is a presumption that the repurchase price is unconscionable if it exceeds 17 percent per annum of the total amount paid by the purchaser to acquire, improve, maintain and hold the property.

This law applies to all businesses located within the state and to out-of-state businesses that provide services to Florida consumers.

The law further regulates businesses or individuals who perform foreclosure related rescue transactions. These transactions involve the actual purchase of the property facing foreclosure, leasing back the property to the original owner, and giving the owner the right to repurchase the property after a period of time. The law requires a written agreement before instrument transferring title can be given to homeowner to sign, requires a notice on the cover page of the written agreement of the consumer’s right to cancel and requires that the purchaser verify the homeowner’s ability to make the payments required to repurchase the home.

Read the full text of the Foreclosure Rescue Fraud Act provided in the Florida Statutes listed below:

  • F.S. 501.1377
    Violations involving homeowners during the course of residential foreclosure proceedings.

  • F.S. 501.212
    Application of the law