The Law

In 2008 the legislature enacted a new law at the urging of the Attorney General to specifically address foreclosure rescue businesses and their potentially abusive practices.

The law 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 law 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 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. If the homeowner's monthly payments for primary housing expenses and regular monthly principal and interest payments on other personal debt do not exceed 60 percent of the homeowner's monthly gross income, there is a presumption there is the ability to pay. The law also provides that the repurchase price cannot be unconscionable. There is a presumption that price is unconscionable if it exceeds 25 to 30 % of actual costs incurred by the purchaser.

Read the full text of the new law provided by 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

UPDATE: Beginning January 1, 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.