Lawmakers Target Real Estate Investors for Regulation
Monday, May 19th, 2008An escalating trend of state legislatures regulating real estate investors who work as foreclosure consultants to help homeowners stave off foreclosure is taking many in our industry by storm.
Distressed Properties and Investors
In attempts to protect desperate homeowners, lawmakers have mandated consumer protections and fines for investors who violate the law. In many instances, these ongoing attempts to restrict real estate investors’ business practices are redefining the distressed property playing field .
With a growing number of real estate entrepreneurs using the Internet and other electronic resources to invest in markets outside of their home states, those who are using short sale, pre-foreclosure, and similar types of transaction strategies to invest in distressed properties should be vigilant in monitoring changes in state laws.
States Collecting Fines and Penalties
Last year, the National Conference of State Legislatures (NCSL) reported that a dozen states had taken steps to actively regulate foreclosure transactions. These states include California, Colorado, Georgia, Illinois, Indiana, Maryland, Minnesota, Missouri, Nevada, New Hampshire, New York and Rhode Island.
This year, more states have either considered or passed new laws geared to protect the interests of distressed homeowners and penalize real estate investors who fail to comply with the law. These laws impose greater regulation on investors than some of the earlier legislation enacted in other states.
Lawmakers in Oregon and Washington have expanded their regulatory scopes by passing comprehensive laws that regulate lending practices and place restrictions on property transaction as well as the contract between investors (or real estate agents) and the sellers.
More Regulation Ahead
According to the National Association of Responsible Home Rebuilders and Investors (NARHRI), a Washington D.C.-based lobbying group for residential real estate investors, recent scrutiny of the industry by lawmakers and other policymakers is setting the stage for broader regulation in the future.
Because many states have assembled task forces to scrutinize business practices surrounding foreclosure and predatory lending, NARHRI predicts that ongoing legislative efforts will continue to target real estate investors by increasing restrictions on foreclosure consultants and their multifaceted business practices – especially with regards to equity-based and lease-back to owner transactions.
Look for ongoing coverage of this important trend here. Has increased regulation affected your business? Are you interested in seeing more posts like this one? Please drop us a line and tell us what you think.
