A Defective Statute

Due to the severity of the financial crisis provoked by the avalanche of mortgage foreclosures, the Florida Legislature recently approved a law it claims is intended to protect the rights of mortgage debtors in the State.  In reality, I believe that this piece of legislation is one of the biggest mistakes I have seen in my legal career.  I am referring to Section 501.1377, which went into effect in October, 2008. 

The Statute was codified under the “Consumer Protection” classification and was based on the premise that consumers with mortgage problems in the State of Florida need protection.  The legislation is divided in two parts.  First, it regulates the conduct of those individuals or entities that seek to acquire properties that are in foreclosure known as “equity purchases.”  The second part of the legislation refers to those individuals that are offering “foreclosure rescue” services. 

Even though the Statute does offer some protection against the so-called “equity purchasers.” the statutory provisions related to the so-called “foreclosure rescue” services are clearly defective.  Essentially, the statute confers legitimacy to this so-called “foreclosure consultants,” which is a problem as it essentially grants statutory authority to provide legal services by individuals without training or licenses.

This legal absurdity is compounded by the fact that existing Florida Law is clear in that individuals providing this type of service must be licensed as either mortgage or real estate brokers.  There are statutes that regulate these professions that require training, passing an examination, and obtaining a license.  Once an individual is licensed, the broker must comply with certain rules of professional conduct.  If he/she fails to follow these rules, the Real Estate Commission has authority to sanction this individual, which could include fines or revocation of the license.

This legislation has apparently created an exception to these licensing requirements and has conferred the authority to non-licensed individuals  regardless of their capacity to provide the services efficiently or honestly.  The problem is further compounded by the fact that if this so-called consultant incurs in improper conduct, there is no entity with authority to sanction this wrong-doing. 

It is somewhat ironic that this legislation has been included in a group of statutes intended to protect consumers.  In contrast, it has opened the doors for certain unscrupulous individuals to defraud consumers with the blessing of the Florida Legislature.  When faced with this absurdity, I feel obligated to make certain recommendations. 

First of all, any company that offers loan modification services must provide the client a written agreement.  Potential clients should insist on meeting the individual that is going to conduct the negotiations and demand that this individual be, at a minimum, a real estate or mortgage broker licensed to practice in the State of Florida.  Secondly, one should demand that the contract clearly define the services to be provided and that one must be kept abreast of all negotiations with the bank.  If the bank tenders an offer which is consistent with one’s best interest, clients should insist that the proposed contract be reviewed by an attorney because these contracts contain terms that could only be reasonably interpreted by experienced attorneys.

Luis A. González
Attorney and Mediator
L. A. González Law Offices, P.A

(407) 649 - 8389