Foreclosure Consultants Prohibited

Those Who Say They Can Get Your Loan Modified, Prevent, Postpone, Or Reverse The Effect Of Such Foreclosure With Your Lender For A Fee.

On July 23, 2008 the U.S. House of Representatives passed the most comprehensive response yet to the American mortgage crisis by a vote of 272-152. The American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, is intended to help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

The bill would prohibit non-HUD approved agencies from providing ANY foreclosure assistance. The bill defines "FORECLOSURE CONSULTANT" as:  meaning a person who makes any solicitation, representation, or offer to a homeowner facing foreclosure on residential real property to perform, for gain, or who performs, for gain, any service that such person represents will prevent, postpone, or reverse the effect of such foreclosure;

While the bill presents great opportunities and resources for HUD approved counseling agencies, the legislation limits the participation of all agencies in the foreclosure counseling process (even those that are tax-exempt). It is interesting to note that enforcement authority over "foreclosure consultants" is granted to the FTC, but the FTC does not have direct enforcement authority or oversight of tax-exempt organizations. There is, however, a private right of action.

The bill does not include

(i) an attorney licensed to practice law in the State in which the property is located who has established an attorney-client relationship with the homeowner;

(ii) a person licensed as a real estate broker or salesperson in the State where the property is located, and such person engages in acts permitted under the licensure laws of such State;

(iii) a housing counseling agency approved by the Secretary;

(iv) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813));

(v) a Federal credit union or a State credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)); or

(vi) an insurance company organized under the laws of any State.