12 Apr What is Real Property Law § 265-b?
Real Property Law § 265-b is intended to protect individual borrowers who have mortgages secured by a one to four family owner-occupied residence, and who are in danger of being foreclosed because of one or more defaults under the mortgage that entitle the lender to accelerate full payment of the mortgage and repossess the property.
What does Real Property Law § 265-b govern?
Real Property Law § 265–b governs the conduct of distressed property consultants. Distressed property consultant or consultant is defined as “an individual or a corporation, partnership, limited liability company or other business entity that, directly or indirectly, solicits or undertakes employment to provide consulting services to a homeowner for compensation or promise of compensation with respect to a distressed home loan or a potential loss of the home for nonpayment of taxes.
Distressed property consultants do not include:
(i) attorneys admitted to practice in the state of New York.
(ii) persons or entities that are owed an obligation secured by a lien on the property.
(iii) a financial institution licensed by the superintendent of financial services or the comptroller of the currency.
(iv) judgment creditors of the homeowner, if the claim accrued before the written notice of foreclosure sale is sent.
(v) a title insurer authorized to do business in New York.
(vi) bona fide not-for-profit organizations that offer counseling or advice to homeowners in foreclosure or loan defaults.
What Consulting Services are regulated by 265-b?
1) Stopping a foreclosure sale or filing, or the loss of a home for nonpayment of taxes.
2) Assist the homeowner to obtain a forbearance or reinstatement of the mortgage.
3) Assist the homeowner to obtain a loan or advance of funds.
4) Assist homeowner in answering or responding to the foreclosure complaint.
5) Save the homeowner’s property from foreclosure or loss of non-payment of taxes.
What is a Distressed Property Consultant Prohibited from doing?
1) A consultant shall not perform consulting services without a written, fully executed contract with the homeowner;
2) Charging or accepting any upfront fee for consulting services before the full completion of all such services;
3) Taking a power of attorney from a homeowner;
4) The consultant may not keep any original loan document or other original documents related to the distressed home loan
Why is Real Property Law § 265-b Important?
This law is designed to protect homeowners who are in distress due to being in default on their mortgage payments. Often times homeowners in distress are approached by “consultants” as real estate agents, investors, or others who typically tell the homeowner that they can help save the house from foreclosure.
As a homeowner, it is imperative that you memorialize in writing any services offered to you by consultants, and make sure that both you and the “consultant” sign the contract for the expected services. Second, and this is probably even more important, do not pay any money upfront until the “consultant” has fully completed his/her services.
Many times clients come to our office after a real estate agent, investor or any other so called “consultant” tried and failed to obtain a loan modification for a distressed homeowner. We often learn that the “consultant” charged the homeowner from $3,000 to $15,000 (or higher) in fees over the course of a year or two while working on getting a loan modification approved. This is illegal! First, it is illegal to collect an upfront fee as a consultant. Second, as a homeowner be mindful that it should not take 1-2 years to work out a loan modification. The consultants often drag out the loan modification process intentionally so that they can continue collecting fees from the homeowner. Be very suspicious of “consultants” that tell you your loan modification process may take 6 -12 months, especially if they are billing you on a monthly basis for their fees. The intention is to stretch the process out intentionally so that they can continue receiving the monthly fees.
Why you should hire an Attorney and not a “Consultant”
A foreclosure defense attorney is licensed to practice law in the State of New York. When you are in foreclosure and a complaint has been filed against, you are now facing a legal proceeding in court. When faced with a legal proceeding, you need to hire an experienced foreclosure defense attorney to represent you, not a consultant. Our attorneys will evaluate your case and advise you of all your options so that you can be better informed. If you retain our services, everything will be memorialized in a retainer agreement, which will include specifically the services which we intend to provide and the cost for such services.
Hire a foreclosure defense attorney and fight the banks to save your home. Banks have attorney and so should you.