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The state of Massachusetts has banned the use of mortgage rescue plans by for profit lenders. The typical bad situation in these type of arrangements is that a borrower is facing foreclosure and an individual or company come in and offers to buy the title to stop the foreclosure. The homeowner in a desperate situation agrees without realizing that the terms are so onerous that they have very little chance of getting the home back.

The equity that they built in the home is lost to the new lender, where is in a perfect world they could be foreclosed upon and still have a chance to get the equity out. In reality, most homeowners who get in this deep do not understand the situation at all and have compounded bad decisions with more bad decisions over the years.

If I had to guess, the law of unintended consequences will kick in and more people that could be helped would be hurt with the new regulation as the law will be over-reaching and prohibit normal and logical transactions that otherwise may have occurred and saved a homeowner.

For-profit lenders often develop “rescue” schemes where they promise to assist homeowners struggling with mortgage payments and facing foreclosure. Sometimes they take over the homeowners’ deeds. But there are often no guarantees that the homeowners, who signed over their deeds, will get their equity back or be able to stay in the homes.
“These ‘rescuers’ take a bad situation — foreclosure — and make it worse by liquidating any remaining equity in homes to their own advantage and the homeowners’ detriment,” Coakley said in a statement. The new rule does not apply to family members or nonprofit or community housing organizations who may try to help. via Reuters.co.uk

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1. Massachusetts Mortgage Rescue Scam Advice
2. San Diego Foreclosure Rescue Scam Busted After 400 Ripped Off
3. More on Mortgage Rescue Fraud
4. Massachusetts Governor’s Foreclosure Prevention Program Expects Mortgage Companies To Bear Burden
5. Lenders Respond To Massachusetts Governor On Foreclosure Delay