Public Act 596 of 2008

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• Introduced by Rep. Charles R. Priest (D) on February 5, 2008, this bill enacts measures designed to protect homeowners from equity stripping during foreclosures. Equity stripping, also known as equity skimming or foreclosure rescue, is often considered a predatory lending practice because the transactions involve companies that take title to or other mortgage interest in foreclosed properties in exchange for allowing the homeowners to remain in the properties as tenants as long as payments are made. If payments are not made, foreclosed homeowners can lose their homes and are also stripped of any equity held in the home prior to the foreclosure. This bill requires a business that engages in these transactions as a foreclosure purchaser to be licensed as a supervised lender before conducting business in this State and to meet other statutory requirements. The bill requires that a foreclosure purchaser must ensure that title is transferred back to the homeowner or that the foreclosure purchaser make a payment to the homeowner of at least 82% of the fair market value of the property within 150 days of when the homeowner is evicted or voluntarily gives back possession of the home. The bill requires that foreclosure purchasers verify that a foreclosed homeowner has a reasonable ability to make the payments needed to take back title to the home. The bill provides that there is a rebuttable presumption of a reasonable ability to pay if a homeowner's monthly payments for housing expenses and principal and interest payments do not exceed 60% of the owner's monthly gross income. The bill requires that the foreclosed homeowner receive counseling on the advisability of the transaction. The bill also requires that the foreclosure purchaser provide a written contract and certain notices and disclosures to the homeowner. The bill gives a homeowner the right to cancel the transaction within 5 business days. The bill prohibits a foreclosure purchaser from making false, deceptive or misleading statements to homeowners and from using unfair or commercially unreasonable terms as part of foreclosure purchase transactions. The bill gives administrative enforcement authority to the Bureau of Consumer Credit Protection within the Department of Professional and Financial Regulation and imposes civil and criminal penalties for violations of the bill's provisions. The bill also gives a foreclosed homeowner the right to bring a private cause of action against a foreclosure purchaser for violations.
  • Referred to the Insurance and Financial Services Committee on February 5, 2008.
  • Amendment offered in the House on April 4, 2008. The amendment passed in the House by voice vote on April 4, 2008.
• Passed in the House by voice vote on April 4, 2008.
• Received in the Senate on April 4, 2008.
• Passed in the Senate by voice vote on April 4, 2008.
• Received in the House on April 9, 2008.
• Passed in the House (134 to 0) on April 9, 2008. [Vote Details and Comments]
• Signed by Gov. John E Baldacci on April 11, 2008.