Foreclosure rescues banned
June 1, 2007 01:23 PM
Massachusetts Attorney General Martha Coakley today issued an emergency ban on foreclosure-rescue transactions, saying they are illegal and take advantage of people who are in the process of losing their homes.
Under such schemes, for-profit companies promise assistance to homeowners facing foreclosure, but end up taking possession of their houses to strip out any equity, leaving the homeowner with nothing.
At a press conference in her Beacon Hill office, Coakley said the emergency regulation would be effective for 90 days to prevent the schemes. She said they are on the rise due to the prevalence of subprime mortgages, and that her office has brought four lawsuits against firms that promote foreclosure rescue plans.
“The harm that is done is often irreparable for the borrower,” Coakley said.
Coakley’s action comes at a time when the state Legislature is still weighing whether to pass a law to deal with the subprime lending and the state’s foreclosure crisis. Subprime mortgages are targeted to homeowners with poor credit, but the low initial payments that make them attractive increase two years into the loan when the interest rate increases.
Coakley said she would seek comments from the public over the next 28 days for proposals to make it illegal for lenders to inflate a borrower’s income on their mortgage application, to make mortgages that borrowers clearly cannot pay; and to provide credit when it is not in the interest of the homebuyer or an existing homeowner who is refinancing a property.
(By Kimberly Blanton, Globe staff)