New Florida Mortgage Rules Kick In Friday
Starting Friday, companies that provide loan modification services must be licensed or face a fine under a law that kicks in to further protect consumers from fraud when they refinance or renegotiate a loan.
Facing a rash of complaints from already cash-strapped consumers, lawmakers earlier this year made changes to the Florida Mortgage Brokerage and Lending Act, which regulates the industry, at a time when renegotiations, foreclosures and other loan modifications are at an all-time high.
“Our goal, along with the many other fine organizations who helped pass this legislation, is to ensure Floridians only pay for loan modification services that are a true benefit; not an unrealistic promise to solve their financial problems,” said Tom Cardwell, commissioner of the Office of Financial Regulation.
Florida now licenses mortgage brokers and mortgage lenders, but does not regulate individuals who renegotiate terms for new and existing mortgages.
The law says individuals and companies may not provide loan modification services without an active license. The new law further enhances the Foreclosure Rescue Fraud Prevention Act, which prohibits individuals and businesses from collecting up-front fees for loan modification services related to foreclosures.
Specifically, the law prohibits the payment of upfront fees for loan modifications. It also requires that brokers meet minimum standards to ensure financial stability. Brokers whose licenses have been previously revoked would be barred from renegotiating loans. Violators would face fines of up to $25,000 per incident.
The law comes in response to an upheaval in the real estate and mortgage lending industries prompted by a crash in the home market. Florida's foreclosure rate in November was the second highest in the nation as one out of every 165 homes was in some stage of foreclosure proceedings.
The law was one of the Financial Services Commission's priorities to protect Florida’s consumers, and as a result, Attorney General McCollum's office has filed 17 civil lawsuits on behalf of Florida homeowners.
“An individual's home is their greatest asset and the implementation of appropriate loan modification guidelines in our state's lending laws is a step in the right direction,” said Valerie J. Saunders, President of Florida Association of Mortgage Brokers.
Lawmakers are expected to return to lending and consumer credit-related issues this spring. Rep. Matt Hudson, R-Naples, and Sen. Mike Bennett, R-Bradenton, have again filed bills to tighten regulations on debt settlement companies, which work with credit card companies and consumers who need to renegotiate their repayment plans. HB 311 and SB 938 have already been filed.
“With all the debt consolidation going on, it was alarming that many of these companies aren’t regulated,” Hudson said.