RALEIGH — In these tough times, it seems as though the American dream of home ownership is under attack from every quarter. Predatory loans, declining home values, harmful mortgage servicing practices and lost jobs have driven foreclosures to record highs.
Sadly, the housing crisis has also lead to an increase in unscrupulous practices in which scam artists take advantage of struggling homeowners and homebuyers trying to attain the American dream. These shady deals take equity from homeowners and leave prospective homebuyers with nothing to show for thousands of dollars in deposits, downpayments and monthly payments that often have been paid for years.
Because North Carolina lacks even the most basic common-sense regulation on issues such as foreclosure rescue scams and alternative purchase agreements, homeowners and buyers can be manipulated into bad deals that devastate families.
Now is the time to act. A bill being considered by state lawmakers would help protect them from abusive practices.
The help is desperately needed. In 2009, there were over 63,000 foreclosure filings in North Carolina. Data from this year indicate that in 2010 there will be even more. This has led to an increase in scammers who approach a homeowner at risk of foreclosure and promise to enable the homeowner to keep the home. These scams are designed to rob owners of any equity remaining in the home and transfer ownership to the scam artist, resulting in homelessness.
At least 21 states have adopted legislation that prohibits or effectively regulates these abusive practices. It is time for North Carolina to do the same.
Another abusive practice is targeting would-be homebuyers with "lease option" contracts and "contract for deed" purchase agreements.
In a lease option agreement, homeowners lease the property and pay for the option to buy it at a later date. While these transactions can sometimes be legitimate, too often the "seller" knows the buyer will never qualify to buy the home. The seller is just milking the buyer for the payment of the option. In these cases, the agreement is little more than another scam.
So-called "contract for deed" transactions can also be very abusive. Homebuyers being told to pay a downpayment and then make monthly payments for 30 years - but only after that 30 years will they be given the deed to the property. Too often the deed is never delivered.
Seven states have already recognized how harmful these transactions can be and have adopted regulations to stop these abuses.
Unfair and unscrupulous uses of real estate transactions exploit and manipulate families who are struggling to pay a home loan, or families having trouble obtaining a loan to purchase a home. They also threatening the economic well being of our state. If we want to encourage affordable homeownership, and promote the economic stimulus it represents, we need to crack down on misleading and harmful practices.
Soon a state House committee will consider a wise and practical way to protect people who own or are looking to purchase a home - Senate Bill 1015, the Homeowner and Homebuyer Protection Act. The bill, sponsored by Sen. Josh Stein of Raleigh, would offer valuable safeguards to homeowners and homebuyers. It would create reasonable standards and protections for "lease option" agreements and "contracts for deed". It would prohibit foreclosure rescue scams that gouge struggling families.
Most important, it would protect the people of North Carolina who are investing in our common future by trying to secure the American dream.
Alfred Ripley is with the N.C. Justice Center.