On February 1, 2007, New York State's "Home Equity Theft Prevention Act" went into effect. This Act amends the Banking Law, Real Property Law, and Real Property Actions and Proceedings Law, and seeks to protect homeowners from a fraudulent practice known as "deed theft."
Deed theft occurs when a home equity purchaser, usually a private company, induces a homeowner (in default of a mortgage) to sell the property for a fraction of its fair-market value by way of oral and written misrepresentations, deceit, intimidation, and other questionable practices.
These con artists coerce homeowners to enter into a contract wherein the purchaser agrees to pay off any monies owed on the home but, in return, secures a deed to the property. The purchaser will allow the former homeowner to remain as a renter and will promise that the property can be redeemed in a year or so, once the homeowners' financial situation has improved. Of course, this representation is almost never fulfilled and the former homeowner is evicted within months of the transfer of title. The purchaser, on the other hand, will sell the property to a third-party at a considerable profit.
The Home Equity Theft Prevention Act now requires certain written disclosures when a home is transferred while an owner is in foreclosure or default of a mortgage. The transfer contract must includes items such as:
the total value of the house that is being sold;
a complete description of the payment terms given to a homeowner in exchange for the house;
the time by which the house will officially become the purchaser's property; and
- the terms of any buyback or "reconveyance" agreement.
The Act now requires mortgagees to provide "consumer education notices" to all homeowners in foreclosure, warning them of these scams and their rights under the new law. The Act also affords homeowners the right to cancel these deals within five days of signing the contract of sale and offers a two-year extended right of rescission for a purchaser's violation of the law. The Act prohibits companies from making false statements which defraud the homeowner, and, provides criminal penalties should such violations occur.
The Banking Department of the State of New York has released a helpful fact sheet which outlines the rights of homeowners under the Act and what recourse is available to you should you believe your rights have been violated.
To access this important information, please use the following link: http://www.banking.state.ny.us/hetpyrul.pdf