I’m in California today and tomorrow attending the 2006 edition of the Predictive Methods Conference (PMC). In addition to delivering tomorrow’s Keynote address on Recognizing, Avoiding, and Recovering from Mortgage Fraud, I’m visiting with conference attendees via my booth in the exhibit hall, as well as sitting in on number really great workshops. In the meantime, for anyone who may have missed it, earlier this month, Illinois Governor Rod Blagojevich signed legislation into law to protect his state’s homeowners from fraudulent actions by unscrupulous mortgage ‘rescue’ firms.

Senate Bill 2349 now gives Illinois’ homeowners new rights when dealing with companies that offer financial assistance to help them save their homes from foreclosure. It also guarantees that homeowners will receive a substantial portion of their equity in the home from the companies.

As we all know, mortgage rescue fraud is popular among the predatory lending crowd. As Illinois’ Attorney General Lisa Madigan says, “without the protections afforded by the Mortgage Rescue Fraud Prevention Act, homeowners are vulnerable to the greediest of predators who take their money and strip the equity in their homes.”

With the recent rise in foreclosures, Illinois has seen a huge growth in the mortgage rescue services offered to homeowners who are delinquent on their mortgages and at risk of foreclosure. Currently in Illinois, there are two known types of mortgage rescue services: the first are consultants who promise the homeowner they can save the home by negotiating with lenders. These consultants can cost $1,000 to $2,500, and often do little or no work for the homeowner.

The second type of mortgage rescue service are property purchasers who offer to help by letting the homeowner rent the property until they can get back on their feet financially. Homeowners do not always understand that they are signing over ownership of the house to these purchasers. In some cases the rent payments end up being more costly than the mortgage payments, making it financially impossible for them to repurchase the house. Once the property purchaser has taken all of the homeowner’s equity out of the house they will resell the house and evict the homeowner. This type of fraud was documented in a recent Chicago Tribune series.

In the first quarter of 2006 there were over 13,000 foreclosures filed in Illinois, a 32 percent increase from the last quarter of 2005 according to another recent story in the Chicago Tribune.

The legislation:

• Limits the amount a mortgage rescuer can make if the homeowner is successful in buying back the home to 125% of the total debt on the home paid by the rescuer.
• Requires that all mortgage rescue companies provide disclosures and give homeowners the right to cancel contracts, and increases penalties for violations.
• Requires that the mortgage rescuer provide the homeowner with at least 82% of the value of their home if the homeowner is eventually unable to buy back the home from the mortgage rescuer.

Senate Bill 2349 becomes effective January 1, 2007.

Governor Blagojevich also signed two additional bills into law that will provide homeowners with additional protections against property fraud.

Senate Bill 2569 requires that the Cook County Recorder of Deeds send a postcard to notify homeowners when a quitclaim deed has been filed. Quitclaim deeds are often used to transfer property without the legal property owner’s knowledge. The Recorder’s Office, who introduced this bill because of recent problems with mortgage fraud and fraudulent transfers of property, has reported an increase in quitclaim deed filings recently. This legislation becomes effective January 1, 2007.

House Bill 4760, now known as Public Act 94-0821, requires that the signatures on any deed or other document that transfers property must be notarized. This legislation becomes effective January 1, 2007.

Thanks to REIPA Board member and Veros President/CEO Darius Bozorgi, who saw me speak at the 5th Annual NPRRA-REIPA Joint Conference in San Antonio earlier this month, I’ve been invited to deliver a Keynote Address at this year’s Predictive Methods Conference (PMC) in Dana Point, California. If you’re not familar with PMC, it’s the annual conference for mortgage lending executives, tech vendors, appraisers, academia and government regulators, all of whom gather to share their thoughts, questions, and insights about automated valuation models (AVMs), collateral risk management, and predictive analytics. Now that’s a mouthful, I know. Said differently, PMC is an informative conference delivering the latest advances and insights in collateral risk management and other mortgage technology, applications, techniques, standards and regulatory issues.

The focus of my address (like you couldn’t guess) is real estate and mortgage fraud. No other issue is as significant to the mortgage industry as fraud. The necessity to verify identity, employment, income, collateral and occupancy weighs heavy as, increasingly, more applicants push the edge of the envelope with both facts and risk. My address, titled “Ignorance of the Law is No Excuse: Recognizing, Avoiding, and Recovering from Mortgage Fraud,” will cover how to spot fraud and steer clear of gray areas in all real estate-related transactions.

One of the really neat things about speaking at this event is that one of the other Keynote speakers is Pro Football Hall of Fame member Joe Montana. According to one of the folks over at PMC, Joe will be talking about assessing risk and achieving success in the midst of chaos; a topic he’s very familiar with!

Click here for more information about PMC 2006. It should be a great event.