Citations Affected: IC 24-5-15; IC 25-34.1-6-2.5; IC 32-30-10.5-8; IC 32-30.1; IC 24-5.5.
Synopsis: Mortgage rescue fraud. Amends the law concerning the
disclosures that a credit services organization must provide to a buyer
to reflect changes in the federal Fair Credit Reporting Act concerning
the circumstances under which a consumer is entitled to a consumer
report without charge from a consumer reporting agency. Moves the
statute concerning mortgage rescue fraud from the Indiana Code title
concerning trade regulation to the title concerning property. Makes
conforming changes to cross-references. Combines two separate
Indiana Code provisions concerning the presuit notice required in
residential foreclosure proceedings into one section, and specifies that
the notice shall be sent by certified mail. Specifies that the statute
concerning mortgage rescue fraud applies only to a foreclosure
proceeding concerning residential real property that is located in
Indiana and to which a homeowner holds record title at the time the
proceeding is initiated. Removes an incorrect cross-reference in the
statute concerning real estate brokers and salespersons. Repeals the
existing statute concerning mortgage rescue fraud.
Effective: July 1, 2010.
January 5, 2010, read first time and referred to Committee on Insurance and Financial
A BILL FOR AN ACT to amend the Indiana Code concerning
agency as provided under the Fair Credit Reporting Act (15
U.S.C. 1681 et seq.).
(5) A statement that the buyer's file is available for review:
(A) at no charge
on request made to the consumer reporting
agency within thirty (30) days after the date of receipt of a
notice that credit has been denied; at the times and under the
circumstances set forth in 15 U.S.C. 1681j; and
(B) for a minimal charge at any other time as provided by 15 U.S.C. 1681j(f).
(6) A complete and accurate statement of the buyer's right to dispute the completeness or accuracy of an item contained in a file on the buyer maintained by a consumer reporting agency.
(7) A statement that accurate information cannot be permanently removed from the files of a consumer reporting agency.
(8) A complete and accurate statement indicating when consumer information becomes obsolete and when consumer reporting agencies are prevented from issuing reports containing obsolete information.
(9) A complete and accurate statement of the availability of nonprofit credit counseling services.
the adverse information appearing on the consumer's credit report
that the credit services organization expects to have modified and
the estimated date by which each modification will occur.
(4) The principal business address of the credit services organization and the name and address of the credit services organization's agent in Indiana authorized to receive service of process.
(b) A contract shall be accompanied by two (2) copies of a form captioned "NOTICE OF CANCELLATION" attached to the contract and that contains the following statement in at least 10 point boldface type:
than the address of the mortgaged property.
If the creditor provides evidence that the notice required by subsection (a) was sent by certified mail, return receipt requested, and as prescribed by this subsection, it is not necessary that the debtor accept receipt of the notice for an action to proceed as allowed under this chapter.
(c) Except as provided in subsection (e) and section 10(g) of this chapter, if a creditor files an action to foreclose a mortgage, the creditor shall include with the complaint served on the debtor a notice that informs the debtor of the debtor's right to participate in a settlement conference. The notice must be in a form prescribed by the Indiana housing and community development authority created by IC 5-20-1-3. The notice must inform the debtor that the debtor may schedule a settlement conference by notifying the court, not later than thirty (30) days after the notice is served, of the debtor's intent to participate in a settlement conference.
(d) In a foreclosure action filed under IC 32-30-10-3 after June 30, 2009, the creditor shall attach to the complaint filed with the court a copy of the notices sent to the debtor under subsections (a) and (c).
(e) A creditor is not required to send the notices described in this section if:
(1) the loan is secured by a dwelling that is not the debtor's primary residence;
(2) the loan has been the subject of a prior foreclosure prevention agreement under this chapter and the debtor has defaulted with respect to the terms of that foreclosure prevention agreement; or
(3) bankruptcy law prohibits the creditor from participating in a settlement conference under this chapter with respect to the loan.
conveyance, of an interest back to the homeowner by the
person or the person's agent that allows the homeowner to
possess the real property following the completion of the
Sec. 5. "Formal settlement" means a face-to-face meeting with a homeowner to complete final documents incident to:
(1) the sale or transfer of real property; or
(2) the creation of a mortgage or equitable interest in real property;
conducted by a person who is not employed by or an affiliate of the foreclosure purchaser.
Sec. 6. "Homeowner" means a person who holds record title to residential real property as of the date on which:
(1) a contract with a foreclosure consultant; or
(2) a foreclosure reconveyance agreement;
with respect to the residential real property is entered into.
Chapter 3. Rescission of Foreclosure Reconveyance Agreements and Contracts With Foreclosure Consultants
Sec. 1. In addition to any other right under law to cancel or rescind a contract, a homeowner may rescind:
(1) a contract with a foreclosure consultant at any time before midnight of the seventh business day after the date the contract is signed; and
(2) a foreclosure reconveyance agreement at any time before midnight of the seventh business day after the homeowner's transfer of the interest in the real property that is the subject of the agreement, as described in IC 32-30.1-2-4(1).
Sec. 2. A homeowner effectively rescinds a contract with a foreclosure consultant if the homeowner gives written notice of a rescission to the foreclosure consultant by one (1) of the following:
(1) Mailing the rescission to the address specified in the contract.
(2) Sending the rescission through any facsimile number or electronic mail address identified in the contract or in any other material provided to the homeowner by the foreclosure consultant.
Sec. 3. (a) If a notice of rescission under this chapter is:
(1) sent by mail; and
(2) properly addressed, with postage prepaid;
the rescission is effective three (3) days after the notice is deposited in the U.S. mail.
(b) A homeowner is not required to give notice of rescission in
the form required under the contract if the form required under
the contract is inconsistent with the requirements set forth in this
Sec. 4. (a) If a homeowner rescinds a foreclosure reconveyance agreement or a contract with a foreclosure consultant, the homeowner shall, not later than thirty (30) days after the date of rescission, repay any amounts paid or advanced by:
(1) the foreclosure consultant or the foreclosure consultant's agent under the terms of the foreclosure consulting contract; or
(2) a person under a foreclosure reconveyance agreement.
(b) A rescission by a homeowner under this chapter is void if the payments required under this section are not made within the time set forth in subsection (a).
Sec. 5. If a homeowner rescinds a contract with a foreclosure consultant, not more than ten (10) days after the effective date of the rescission, the foreclosure consultant shall return to the homeowner any payments made by the homeowner, less any amounts for actual services rendered.
Chapter 4. Limitations on Foreclosure Consultants and Foreclosure Reconveyances
Sec. 1. For purposes of this chapter, there is a rebuttable presumption that:
(1) a homeowner has a reasonable ability to pay for a subsequent reconveyance of real property if the homeowner's payments for primary housing expenses and regular principal and interest payments on other personal debt, on a monthly basis, do not exceed sixty percent (60%) of the homeowner's monthly gross income; and
(2) the foreclosure purchaser has not verified reasonable payment ability if the foreclosure purchaser has not obtained documents other than a statement by the homeowner of assets, liability, and income.
Sec. 2. In addition to any prohibitions that apply under IC 24-5-15-1 through IC 24-5-15-8, a foreclosure consultant may not:
(1) enter into or attempt to enter into a foreclosure consultant contract with a homeowner unless the foreclosure consultant first provides the homeowner written notice of the homeowner's rights under this article;
(2) demand or receive compensation until after the foreclosure consultant has fully performed all services the
foreclosure consultant contracted to perform or represented
that the foreclosure consultant would perform, unless the
foreclosure consultant complies with the security
requirements under IC 24-5-15-8;
(3) demand or receive a fee, interest, or any other compensation that exceeds eight percent (8%) per year of the amount of any loan that the foreclosure consultant makes to the homeowner;
(4) take a wage assignment, a lien of any type on real or personal property, or any other security to secure the payment of compensation;
(5) receive consideration from a third party in connection with foreclosure consulting services provided to a homeowner unless the consideration is first fully disclosed in writing to the homeowner;
(6) acquire any interest, directly or indirectly, in residential real property in foreclosure from a homeowner with whom the foreclosure consultant has contracted; or
(7) except to inspect documents as provided by law, take any power of attorney from a homeowner for any purpose.
Sec. 3. A foreclosure purchaser may not enter into or attempt to enter into a foreclosure reconveyance agreement with a homeowner unless:
(1) the foreclosure purchaser verifies and demonstrates that the homeowner has or will have a reasonable ability to:
(A) pay for the subsequent reconveyance of the real property back to the homeowner on completion of the terms of the foreclosure conveyance; or
(B) if the foreclosure conveyance provides for a lease with an option to repurchase the real property, make the lease payment and repurchase the real property within the period of the option to repurchase;
(2) the foreclosure purchaser provides the homeowner written notice of the homeowner's rights under this article;
(3) the foreclosure purchaser and the homeowner complete a formal settlement before any transfer of interest in the affected property; and
(4) the foreclosure purchaser complies with the security requirements under IC 24-5-15-8.
Sec. 4. A foreclosure purchaser shall:
(1) ensure that title to real property has been reconveyed to the homeowner in a timely manner if the terms of a
foreclosure reconveyance agreement require a reconveyance;
(2) if the real property subject to a foreclosure reconveyance agreement is sold within eighteen (18) months after entering into the foreclosure reconveyance agreement, make payment to the homeowner not later than ninety (90) days after the resale of the real property in an amount equal to at least sixty-six percent (66%) of the net proceeds from the resale of the real property.
Sec. 5. A foreclosure purchaser may not:
(1) enter into repurchase or lease terms as part of the foreclosure reconveyance that are unfair or commercially unreasonable or engage in any other unfair conduct;
(2) represent, directly or indirectly, that the:
(A) foreclosure purchaser is acting:
(i) as an adviser or a consultant; or
(ii) in any other manner;
on behalf of the homeowner;
(B) foreclosure purchaser is assisting the homeowner to save the residential real property; or
(C) foreclosure purchaser is assisting the homeowner in preventing a foreclosure if the result of the transaction is that the homeowner will not complete a redemption of the real property; or
(3) until the homeowner's right to rescind or cancel the foreclosure reconveyance agreement has expired:
(A) record any document, including an instrument or conveyance, signed by the homeowner; or
(B) transfer to a third party or encumber, or purport to transfer to a third party or encumber, any interest in the residential real property in foreclosure.
Sec. 6. A foreclosure purchaser shall make a detailed accounting, on a form prescribed by the attorney general, of the basis for the amount of payment made to a homeowner of real property resold within eighteen (18) months after entering into a foreclosure reconveyance agreement.
Sec. 7. A foreclosure consultant shall retain:
(1) the foreclosure consultant contract; and
(2) all other records and documents related to services performed on behalf of a homeowner;
for at least three (3) years after the termination or conclusion of the foreclosure consultant contract entered into by the foreclosure
consultant and the homeowner.
Chapter 5. Enforcement
Sec. 1. A person who violates this article commits a deceptive act that is actionable by the attorney general under IC 24-5-0.5-4 and is subject to the penalties and remedies available to the attorney general under IC 24-5-0.5.
Sec. 2. (a) A homeowner may bring an action against a person for damages incurred as a result of a violation of this article.
(b) A homeowner who:
(1) brings an action under this section; and
(2) is awarded damages;
may seek reasonable attorney's fees.
Sec. 3. (a) A court may award attorney's fees under section 2(b) of this chapter.
(b) If the court finds that a person willfully or knowingly violated this article, the court may award damages equal to three (3) times the amount of actual damages.
Sec. 4. (a) The Indiana housing and community development authority shall maintain a list of nonprofit organizations that:
(1) offer counseling or advice to homeowners:
(A) in or facing foreclosure; or
(B) who have defaulted or may default on a home loan; and
(2) do not contract for services with for-profit lenders or foreclosure purchasers.
(b) The Indiana housing and community development authority shall provide the names and telephone numbers of the organizations described in subsection (a) to a homeowner upon request.
Sec. 5. The attorney general may adopt rules under IC 4-22-2 necessary to implement this article or IC 24-5.5 (before its repeal on July 1, 2010).
Sec. 6. Except as provided in IC 24-5-15-7(d), this article may not be construed to preempt IC 24-5-15-1 through IC 24-5-15-11.
SECTION 6. IC 24-5.5 IS REPEALED [EFFECTIVE JULY 1, 2010].