New York has enacted The Home Equity Theft Prevention Act effective February 1, 2007. The Act creates two new statutory provisions: Real Property Actions & Proceedings Law Secs. 265-a and 1303, and amends Section 595-a of the Banking Law.
The new law requires require written disclosure to homeowners regarding the terms of the title transfer and provide a right to cancel the deal for five days after signing the contract. It would prohibit making false statements with intent to defraud the homeowner and would establish civil and criminal penalties for violating the law.
The Act protects a homeowner who has conveyed a deed to a predator (or anyone later identified to be engaged in the practice of deed stealing or equity theft). The Act requires foreclosing lenders to issue certain notices warning about scams.
Failure on the part of foreclosing lenders to properly advise distressed homeowners could result in the nullification of the foreclosure action. Any transfer of title in material violation of the Act is voidable, and can be rescinded by the Seller within two years of recording the deed.
The practical effect of how the implementation of this law will impact real estate brokers, lenders, mortgage brokers, purchasers of distressed properties and attorneys is unclear at this point.
However, the text of the Act will require major restructuring of legal language in certain real estate contracts and foreclosure action notices. The Act also imposes a requirement that certain contracts of sale be produced in both English and Spanish if Spanish is the primary language of the equity seller. On the bi-lingual contracts, an initial question is whose responsibility is it to determine if the equity seller uses Spanish as his or her primary language?
Will it be necessary to produce copies in both languages to protect everyone else involved in the transaction —- better safe than sorry? Who is responsible to pay for the translation of the contracts into Spanish? The Act raises many questions that need to be resolved.