This post is my attempt to give a plain language quick overview of the Maryland Protection of Homeowners in Foreclosure Act. The MD legislature passed PHIFA as a response to foreclosure scams. The Act is so broad and sweeping that many real estate professionals that provide services to homeowners in default or facing foreclosure must comply with it. This includes many of my real estate professional colleagues such as real estate agents, real estate wholesalers, attorneys such as myself. This is legal information to give real estate professionals an understanding of PHIFA. This is not legal advice on how to comply with it. Be sure to consult with a foreclosure attorney if you need help on just how to comply with it.
What Does PHIFA Do?
PHIFA regulates the activities of what it calls “foreclosure consultants” and “foreclosure purchasers.” A “foreclosure” consultant is defined by the act as anyone who represents to a homeowner by any means of communication to offer or performs any of these services including, but not limited to:
- Stopping Foreclosure. (Or delaying it, voiding it, setting it aside, voiding it, or postponing it).
- Obtaining Forebearance or exercising the right of reinstatement after notice of foreclosure proceedings have been provided.
- Extend foreclosure deadlines.
- Save the homeowner from foreclosure.
- Purchase or obtain an option to purchase a home within 20 days of an advertised docketed or foreclosure sale.
- Help the homeowner obtain a loan or advance funds.
- Arranging or facilitating the sale of the home to another party as an alternative to foreclosure.
- For full list see Md. Real Property Code § 7–301
Basically, if you are a real estate investor, real estate agent or broker, or attorney that performs practically ANY services for people facing foreclosure then there is a very good chance that you are a “foreclosure consultant” as defined by the statute.
What Foreclosure Consultants Must (And Must Not) Do Under PHIFA
- Provide a “foreclosure consulting contract” that outlines the scope of work to be provided for the homeowner
- Cannot receive ANY compensation until after all services outlined in the contract have been performed.
- Cannot acquire any interest in the property or help family members acquire an interest.
- Can only be compensated with money. (No securities in real estate or personal property)
- Must give a copy of any research the consultant acquires regarding the value of the property.
- Cannot receive any compensation from a third party unless it is disclosed in writing.
- Cannot recommend homeowners to foreclosure consulting services that do not comply with the act.
- Forbidden from “foreclosure rescue transactions”. This is a deal where the homeowner gets to stay in the home after conveying an interest.
- Cannot receive a commission that exceeds 8% of the sales price.
- Real estate brokers/agents must provide homeowners with a copy of their license no later than when a foreclosure consulting contract is executed.
- For full list see Md. Real Property Code § 7–307
What Foreclosure Purchasers Must Do Under PHIFA
A “foreclosure purchaser” is a person who acquires title or possession as the result of a foreclosure reconveyance. A foreclosure purchaser must give the homeowner a Notice of Transfer of Deed or Title that must contain certain information. He must aslo provide him with a Notice of Right to Cancel Transfer or Deed or Title to the homeowner that gives the homeowner the right to cancel the transaction with three days, as well as contain other information. The purchaser cannot record the deed during the rescission period. A purchaser cannot represent to the homeonwer that he is “saving the home”.
Damages Under PHIFA
Damages For Violations of The Protection of Homeowners in Foreclosure Act are very stiff. The Plaintiff may recover money damages, attorney’s fees, and rescind the sale. If the violation is willful, then a court may award treble damages.
Need Help Complying With The Maryland Protection of Homeowners in Foreclosure Act?
Do not hesitate to contact me. I can help foreclosure consultants and purchasers comply with PHIFA in their practice.