Previous legislation in Florida referred to as "Victimization" statutes also tried to slow or stop the pace of investor fraud against unsophisticated homeowners and homeowners in financial trouble.



Both legislative efforts were well intended, but as with many other states passing similar legislation, the result will have negative effects on the housing market.

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.

Florida is not the first state to enact this type of legislation, in fact, eighteen states and more to follow, have enacted various forms of legislation designed to control the purchase and sale of real estate and investors who invest in real estate.

In time, every state will probably enact similar legislation. I could take time to tell about the horrors of some of the changes and the sky-rocketing foreclosure rates that happened because of this legislation in other states, but for this article I will stick to the issue of the Florida Statute.

Florida legislators began focusing on real estate investors because of the volume of complaints about seemingly huge profits investors made and fraud by a few unscrupulous investors.

Large profits on transactions where the homeowner/seller was not scammed out of his property are part of the industry in rare instances. However, on average, investors take real market risks in return for the hope of a profit.

In the years between 2000 and 2006, it was easy to make profits because of lenders giving money to perspective buyers who needed a home but should have been renting because home ownership for them was actually unaffordable.

It is critical that investors familiarize themselves with the statute and its ramifications. This new law differs from previous legislation because the fines are awarded to the homeowner directly and a "verbal statement" by the FRC or EP can be construed as part of the written contract between the two parties! Take action to protect yourself by using attorney drafted disclosures and contracts.

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.