TITLE 6

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 24B. FORECLOSURE CONSULTANTS AND RECONVEYANCES

Subchapter I. General Provisions


This chapter may be cited as the "Mortgage Rescue Fraud Protection Act.''

76 Del. Laws, c. 419, § 1.;

The purpose of this chapter is to protect homeowners from unfair or deceptive practices by foreclosure consultants or through foreclosure reconveyance agreements.

76 Del. Laws, c. 419, § 1.;

As used in this chapter, unless the context requires otherwise:

(1) "Foreclosure consultant'' means a person who:

a. Solicits or contacts a homeowner in writing, in person, or through any electronic or telecommunications medium, and directly or indirectly makes a representation or offer to perform any service that the person represents will:

1. Stop, enjoin, delay, void, set aside, annul, stay, or postpone a foreclosure sale;

2. Obtain forbearance from any mortgager servicer, mortgagee or mortgage assignee;

3. Assist the homeowner to exercise a right of reinstatement provided in the mortgage loan documents or to refinance a mortgage loan that is in foreclosure and for which an action to foreclose the mortgage has been filed;

4. Obtain an extension of the period within which the homeowner may reinstate the homeowner's obligation or extend the deadline to object to a ratification;

5. Obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a residence in default or contained in the mortgage;

6. Assist the homeowner to obtain a loan or advance of funds;

7. Avoid or ameliorate the impairment of the homeowner's credit resulting from an action to foreclose the mortgage or the conduct of a foreclosure sale;

8. Save the homeowner's residence from foreclosure;

9. Purchase or obtain an option to purchase the homeowner's residence in foreclosure within 20 days prior to the date advertised for a foreclosure sale;

10. Arrange for the homeowner to become a lessee or renter entitled to continue to reside in the homeowner's residence in default;

11. Arrange for the homeowner to have an option to repurchase the homeowner's residence in default; or

12. Engage in any documentation, grant, conveyance, sale, lease, trust, or gift by which the homeowner limits or impairs the homeowner's equity of redemption in the homeowner's residence in foreclosure; or

b. Systematically contacts owners of residences in default to offer foreclosure consulting services.

(2) "Foreclosure consulting contract'' means a written, oral, or equitable agreement between a foreclosure consultant and a homeowner for the provision of any foreclosure consulting service or foreclosure reconveyance.

(3) "Foreclosure consulting service'' includes:

a. Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a lien on a residence in default;

b. Contacting creditors on behalf of a homeowner;

c. Arranging or attempting to arrange for an extension of the period within which a homeowner may cure the homeowner's default and reinstate the homeowner's obligation;

d. Arranging or attempting to arrange for any delay or postponement of the foreclosure sale of a residence in default;

e. Arranging or facilitating the purchase of a homeowner's equity of redemption or legal or equitable title in the homeowner's residence in foreclosure within 20 days prior to date advertised for a foreclosure sale;

f. Arranging or facilitating any transaction through which a homeowner will become a lessee, optionee, life tenant, partial owner, or vested or contingent remainderman of the homeowner's residence in default;

g. Arranging or facilitating the sale of a homeowner's residence in default or the transfer of legal title, in any form, to another party as an alternative to foreclosure;

h. Arranging for a homeowner to have an option to repurchase the homeowner's residence in default after its sale or transfer;

i. Arranging for or facilitating a homeowner remaining in the homeowner's residence in default as a tenant, renter, or lessee; or

j. Arranging or facilitating any other grant, conveyance, sale, lease, trust, or gift of the homeowner's residence in default.

(4) "Foreclosure purchaser'' means a person who acquires title or possession of a deed or other document transferring title to a residence in foreclosure as a result of a foreclosure reconveyance.

(5) "Foreclosure reconveyance'' means a transaction involving:

a. The transfer of title to a residence in foreclosure by a homeowner during or incident to a foreclosure proceeding, either by transfer of interest from the homeowner to another party or by creation of a mortgage, trust, or other lien or encumbrance that allows the acquirer to obtain legal or equitable title to all or part of the property; and

b. The subsequent conveyance, or promise of a subsequent conveyance, of an interest back to the homeowner by the acquirer, or a person acting in participation with the acquirer, that allows the homeowner to possess the real property following the completion of the foreclosure proceeding, including an interest in a contract for deed, purchase agreement, land installment sale, contract for sale, option to purchase, lease, trust, or other contractual arrangement.

(6) "Homeowner'' means the record owner of a residence in default or a residence in foreclosure.

(7) "Primary housing expenses'' means the total amount required to pay regular mortgage principal, mortgage interest, rent, utilities, hazard insurance, real estate taxes, and association dues on a property.

(8) "Related person'' for an individual, means the individual's parents, spouse, children (natural or adopted), and siblings of the whole or half blood; and for an entity, means a person who directly or indirectly or with another related person owns 5% or more of the equity in that entity.

(9) "Resale'' means a bona fide market sale of property subject to a foreclosure reconveyance by the foreclosure purchaser to an unaffiliated third party.

(10) "Resale price'' means the gross sale price of a property on resale.

(11) "Residence in default'' means residential real property consisting of not more than 4 single-family dwelling units, 1 of which is occupied by the owner as the individual's principal place of residence, and on which the mortgage is at least 60 days in default.

(12) "Residence in foreclosure'' means residential real property consisting of not more than 4 single-family dwelling units, 1 of which is occupied by the owner as the individual's principal place of residence, and against which any type of foreclosure action has been filed.

(13) "Settlement'' means an in-person, face-to-face meeting with the homeowner to complete final documents incident to the sale or transfer of real property, or the creation of a mortgage or equitable interest in real property, conducted by a settlement agent who is not employed by, or an affiliate of, the foreclosure purchaser, during which the homeowner must be presented with a completed copy of the HUD-1 Settlement form.

76 Del. Laws, c. 419, § 1; 78 Del. Laws, c. 196, §§ 1-5.;

This chapter does not apply to:

(1) An individual admitted to practice law in this State, while performing any activity related to the individual's regular practice of law in this State;

(2) A person who holds, or is owed as an obligation secured by, a lien on any residence in default with respect to which the person performs services in connection with the obligation or lien, if the obligation or lien did not arise as a result of a foreclosure reconveyance;

(3) A person doing business under any law of this State or the United States, which law regulates banks, trust companies, savings and loan associations, credit unions, insurance companies while performing services as part of the person's normal business activities;

(4) A person originating or closing a loan in a person's normal course of business if, as to that loan:

a. The loan is subject to the requirements of the federal Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617; or

b. With respect to any second mortgage or home equity line of credit, the loan is subordinate to, and closed simultaneously with, a qualified first mortgage loan under paragraph (4)a. of this section or is initially payable on the face of the note or contract to an entity included in paragraph (3) of this section;

(5) A judgment creditor of the homeowner, if the judgment creditor's claim accrued before the action to foreclose is filed;

(6) A title insurer authorized to conduct business in this State while performing title insurance services;

(7) A person licensed as a mortgage broker or lender under Title 5 while acting under the authority of that license;

(8) A person licensed as a real estate broker or real estate salesperson under the Delaware Code while engaging in any activity for which the person is licensed;

(9) A nonprofit organization that offers counseling or advice to homeowners in foreclosure or loan default, if the organization is not directly or indirectly related to, and does not contract for services with, for-profit lenders or foreclosure purchasers;

(10) An organization that is licensed to practice debt management services under Chapter 24A of this title while the person engages in any activity for which the organization is licensed;

(11) A public corporation, government or governmental subdivision, agency, or instrumentality; or

(12) A lien hold mortgagee who takes title through the normal state prescribed foreclosure process or through a deed in lieu of foreclosure.

76 Del. Laws, c. 419, § 1; 78 Del. Laws, c. 196, § 6.;

The disclosures and documents required by this chapter must be in English. If a person communicates with an individual primarily in a language other than English, that person must furnish a translation into the other language of the disclosures and documents required by this chapter.

76 Del. Laws, c. 419, § 1.;