Foreclosure Consultants Are Expected To Increase When homeowners receive a home foreclosure notice they often look for help from consultants who may not have the homeowners’ best interest in mind and may instead take title to the about-to-be-foreclosed property, thereby cheating the owners out of any equity they might have had in the property. The fraudulent consultants pocket the profit gained on the equity when the property is sold and the homeowner loses it all.
Under a new bill (LB1230) introduced into the Nebraska Legislature consultants are restricted as to the advice they can give, homeowners have the opportunity to rescind any agreement which removes their home equity, and consultants are barred from asking for title to the property.
The bill is similar to ones in place in eight U.S. states already, including one passed in Colorado last year. They are designed to protect consumers from questionable practices in the foreclosure consultancy businesses, which are springing up all over the country.
Foreclosure consultants are expected to increase due to the tremendous increase in the number of foreclosures in this country.
According to the Center for Responsible Lending, foreclosures rates for subprime loans made during the last two years are expected to double. This chilling projects means that as many as one in five subprime mortgages which originated during the last two years could end up in trouble. Subprime loans
are those
made at higher interest rates and sometimes with complicated financing
structure. For example the loan known as a 228 has two years of fixed
interest rates and then is allowed to increase sometimes to dramatically
higher levels in a short period of time. In many cases, the 228 loans
are starting to arrive at the point where the interest begins to increase
which leads experts to believe that foreclosure rates will also increase.
Another
factor impacting the foreclosure rate is the cooling housing market
which means people seeking to refinance their houses to avoid potential
foreclosure no longer have equity to show in order to refinance.
While
there are an increasing number of foreclosures and an increasing number of foreclosure consultants, the legislation
is intended to prevent the consultant from obtaining the deed to a $100,000 house
with $75,000 owing and pocketing the profit based on the $25,000 equity in the
house. The bill was crafted by members of the State Banking Department and is
aimed at the few ‘bad apples’ who take unfair advantage of people at a most vulnerable
time.
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