By way of background information regarding Florida's Foreclosure-rescue Fraud Legislation, investors are a much maligned group of small business entrepreneurs who take financial risks to purchase properties when almost no one else will, and face the financial loss of carrying properties that may or may not be sold for a profit.



Despite the complaints of realtors when an investor makes a low-ball offer, very often there are no other offers for many properties.

Realtors do not buy properties, appraisers will not buy properties for their appraised values, mortgage brokers and lenders will not buy properties for loan values unless forced to do so through foreclosure. While some legislators call investors scavengers, other legislators refer to investors as the engine that drives the American economy, which is coming true more so every day.

Interesting how different individuals can see so much difference in the profession of real estate investing.

Truly, investors are the safety net of the real estate industry and frankly, the banking industry.

Was it not for investors buying bank owned properties ("REO's"), foreclosures, and distressed properties they essentially set a glass floor on property values.

Without this support from investors a depression of the greatest magnitude ever could easily take hold of property values throughout America.

While investors have been blamed for the sub-prime lending crisis, the reality is that the greed of nearly every lending institution allowed individuals to finance homes they could not afford resulting in massive foreclosures, bank failures, and loss of a fundamental underpinning of our society.

So with the background of flat or declining real estate prices, gluts of condos, unemployment associated with the real estate industry, and general complaints from a vocal minority, Florida's legislators decided to focus their attention on the foreclosure industry for abusive practices by investors.

In any industry and any profession, no matter how regulated, there are always individuals who abuse the system. In real estate, homeowners in foreclosure are bewildered, frustrated and get little or no help from their lenders who were originally willing to give loans that could not possibly work for the homeowner.

When something happens to the homeowner's financial position, his lender is unsympathetic and most often has the attitude that it's the lender's way or no way at all.

Real estate investors also use creative, but legal, financing techniques to purchase properties that most non-investors consider illegal, immoral, or unethical, none of which are usually true.

Because of this, legislators have written their legislation to control these creative financing methods. The inevitable result is less money for investors to buy properties, with continuing further declines in home values.

At least one state has passed legislation governing the maximum profit a property can be resold for, resulting in a further collapse of the housing values in that state.

Florida's most recent statute to protect homeowners in foreclosure focuses on two groups of individuals. First, is the Foreclosure Rescue-Consultant ("FRC") and the second is the Equity Purchaser ("EP"). The FRC is an area where major abuses have occurred because some FRC's have taken money from homeowners in foreclosure and not done what they promised to do, which was usually to stop the homeowner's foreclosure.

Other promises have included doing short sales, postponing the homeowner's having to leave the property, negotiating loan modifications, credit score improvements, and other remedies for foreclosure that were never done.

The fees for the services were paid up-front and the homeowner got little or no benefit. In many cases there may have been fraud, while in many other cases, the lenders were uncooperative and the result was the homeowner was forced to leave his home.

The new legislation, Florida Stature 501.1377, was signed by Florida's Governor on May 28, 2008. FRC's are now required to follow strict disclosure requirements including incorporating the exact text in the statute into contracts and disclosure documents, the size of the type, the use of upper case letters in the entire document - not just the specific required clauses, and a strict cancellation procedure.

The actual statute becomes law on October 1, 2008 and repeals an existing "Victimization Statute" F.S. 501.2078 which has been in effect for some time.

This is a brief overview of the Florida Statute 501.1377 and is not meant to be a legal opinion advice and is for educational purposes only.