History

• The Home Equity Theft Prevention Act went into effect in 2007 in New York state. The specific type of scam the laws intended to prevent involved a homeowner facing financial difficulty being offered the chance to "save" her home by signing over the real estate for a small percentage of the actual value. Some scams promised to refinance the loan, while others claimed to handle dealings with the foreclosing lender. The scam artist then obtains a mortgage on the home himself or sells the home to a second party, leaving the homeowner with nothing.
  
  

Effects

• HETPA added a new section to real property law in New York that set strict standards for any sales of a home in foreclosure or mortgage default involving a reconveyance agreement, or an option offered by the purchaser to eventually give the home back to the seller. Banking law was revised to prohibit persons or businesses engaged in mortgage lending from granting a mortgage to an applicant suspected of not complying with the new section. The foreclosure section of real property actions and proceedings law was amended to require a foreclosing lender deliver a notice to the homeowner warning him of potential home equity scams.
  
  

Considerations

• HETPA provisions, other than the foreclosure notice requirement, only apply to sales and transfers contracts that are "covered" by the law. A person who intends to use the house as her primary home is not covered, as well as transfers between spouses, immediate family members, non-profits and court-ordered transactions.
  
  Any person or business found to have violated HETPA's contract provisions can lose the real estate and face penalties, charges and a lawsuit from the seller. The deal can be overturned for up to two years after the date of sale, and the seller can sue the buyer for damages for up to six years after the transfer.
  
  

Misconceptions

• HETPA does not restrict the transfer of equity entirely, but gives the seller certain rights. All covered contracts must be written in at least 12-point bold type to make the document easier for the seller to read, and the seller must have a clause allowing him to cancel the deal without penalty for at least five business days after he signed. The equity buyer cannot file a deed, the legal document used to show real estate ownership, or perform any actions with the real estate until the five days have passed.