House passes bill to crack down on foreclosure rescue scams

Lantz hails unanimous passage as 'helping families stay in their homes'

February 6, 2008 

Olympia, WA – Washington homeowners have more protection from foreclosure rescue scams under legislation passed by the House today.  The bill, sponsored by Rep. Pat Lantz (D - Gig Harbor), provides numerous consumer protection provisions for those who sign contracts with distressed property purchasers.  Distressed property purchasers claim to be able to stop foreclosure and help people keep their homes, but in reality the deals they offer can end up leaving people homeless and without any equity.

"The term 'distressed property' is really a quirk of legalese," Lantz said.  "It's the homeowner who is in distress, and because of this distress is vulnerable to unfair and deceptive practices."

In a speech from the House floor, Lantz described how unscrupulous purchasers prey on families facing eviction by offering to purchase their property and assume the debt.  In desperation, homeowners sign deals with these purchasers, agreeing to lease the home from them with the understanding they will have an option to repurchase it.  But the terms of these deals are as out of reach as the original mortgage, leading many to default on their lease payments.  The result is not only the loss of the home, but the equity in it as well.  In a public hearing on the bill, legislators heard testimony from a Pierce County family who had been left homeless by such a deal.

The consumer protection provisions contained in Lantz's bill include requiring a purchaser to demonstrate that a homeowner has reasonable ability meet the terms of the contract and repurchase the home.  It also makes purchasers liable for up to treble damages if they are found in violation of the Consumer Protection Act.  Additionally, homeowners would have a five day "right of cancellation" to back out of the contract if they change their mind.

"A vote for this bill is a vote to help families stay in their homes," Lantz said. 

The final vote on the bill, HB 2791, was 96-0.  It now goes to the Senate for consideration.