Mortgage Fraud, Mortgage Assistance Relief Services & Foreclosure Consultants - Financial Regulation
Last reviewed/updated: January 5, 2023
- Mortgage Fraud
- Mortgage Assistance Relief Service Providers
- Foreclosure Consultants
- Law, Rules, and Regulations
Mortgage Fraud is prohibited in Maryland by any person engaging in the mortgage lending process. This means the process by which a person seeks or obtain a mortgage loan, including the solicitation, application, origination, negotiation, servicing, underwriting, signing, closing, and funding of a mortgage loan; and the notarizing of any document in connection with a mortgage loan. Refer to Md. Code Ann., Real Prop. §7-401(e).
Mortgage fraud includes any action by a person made with the intent to defraud a mortgage lender, borrower, or any other party to the mortgage lending process (whether through any deliberate misstatement, misrepresentation, or by omission), as well as conspiring to do so, or receiving any proceeds or other funds in connection with a mortgage closing that the person knows was a result of mortgage fraud. Mortgage fraud also includes the filing in the land records of any document relating to a mortgage loan that the person knows to contain a deliberate misstatement, misrepresentation, or omission. Refer to Md. Code Ann., Real Prop. §7-401(d).
Mortgage Assistance Relief Service Provider
A Mortgage Assistance Relief Service Provider is a person who provides any service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following:
- Stopping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession;
- Negotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees;
- Obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan;
- Negotiating, obtaining, or arranging any extension of the period of time within which the consumer may cure a default on a dwelling loan, reinstate a dwelling loan, redeem a dwelling, or exercise any right to reinstate a dwelling loan or redeem a dwelling;
- Obtaining any waiver of an acceleration clause or balloon payment contained in any promissory note or contract secured by any dwelling; or
- Negotiating, obtaining or arranging a short sale of a dwelling, a deed-in-lieu of foreclosure, or any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.
Under Maryland law, a Mortgage Assistance Relief Service Provider must comply with each provision of CFPB’s Regulation O covering Mortgage Assistance Relief Services. Refer to Md. Code Ann., Real Prop. §7-502; 12 CFR Part 1015. Of particular import, is the prohibition on the collection of up-front fees or any other up-front consideration from consumers prior to the consumer executing a written agreement with the mortgage lender or servicer incorporating the offer of mortgage assistance relief the provider obtained from the mortgage lender or servicer. Refer to 12 CFR Part 1015.5.
A Foreclosure Consultant systematically contacts owners of residences in default to offer foreclosure consulting services, or solicits or contacts a homeowner, who is in default or in foreclosure on their mortgage, in writing, in person, or through any electronic or telecommunications medium and directly or indirectly makes a representation or offers to perform any service that the person represents will:
- Stop, enjoin, delay, void, set aside, annul, stay, or postpone a foreclosure sale;
- Obtain forbearance from any servicer, beneficiary or mortgagee;
- Assist the homeowner to exercise a right of reinstatement provided in the loan documents or to refinance a loan that is in foreclosure and for which notice of foreclosure proceedings has been published;
- Obtain an extension of the period within which the homeowner may reinstate the homeowner's obligation or extend the deadline to object to a ratification;
- Obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a residence in default or contained in the mortgage;
- Assist the homeowner to obtain a loan or advance of funds;
- Avoid or ameliorate the impairment of the homeowner's credit resulting from the filing of an order to docket or a petition to foreclose or the conduct of a foreclosure sale;
- Save the homeowner's residence from foreclosure;
- Purchase or obtain an option to purchase the homeowner's residence within 20 days of an advertised or docketed foreclosure sale; or
- Arrange for the homeowner to become a lessee or renter entitled to continue to reside in the homeowner's residence after a sale or transfer; or
Foreclosure consulting services include:
- Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a lien on a residence in default;
- Contacting creditors on behalf of a homeowner;
- Arranging or attempting to arrange for an extension of the period within which a homeowner may cure the homeowner's default and reinstate the homeowner's obligation;
- Arranging or attempting to arrange for any delay or postponement of the sale of a residence in default;
- Arranging or facilitating the purchase of a homeowner's equity of redemption or legal or equitable title;
- Arranging or facilitating the sale of a homeowner's residence or the transfer of legal title, in any form, to another party as an alternative to foreclosure; or
- Arranging for or facilitating a homeowner remaining in the homeowner's residence after a sale or transfer as a tenant, renter, or lessee under terms provided in a written lease.
A Foreclosure Consultant must provide foreclosure consulting services pursuant to a written contract, which, in-part, shall provide a homeowner with the right to rescind a foreclosure consulting contract at any time. Refer to Md. Code Ann., Real Prop. §7-306. A Foreclosure Consultant is prohibited from engaging in any way in a foreclosure rescue transaction – a transaction (a) in which a residence in default is conveyed by a homeowner who retains a legal or equitable interest in all or part of the property, including an interest under a lease-purchase agreement, an option to reacquire the property, or any other legal or equitable interest in the property conveyed, and (b) that is designed or intended by the parties to prevent or delay actual or anticipated foreclosure proceedings against the residence in default. Additionally, a Foreclosure Consultant may not receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that the foreclosure consultant would perform and may not receive any money to be held in escrow or on a contingent basis on behalf of a homeowner. Refer to Md. Code Ann., Real Prop. §7-307 for a complete list of prohibited conduct.
NOTE: A Foreclosure Consultant owes the same duty of care to a homeowner as a licensed real estate broker owes to a client, such as exercising reasonable care and diligence. Refer to Md. Code Ann., Real Prop. §7-309(b).
Laws, Rules, and Regulations
Persons engaging in the mortgage lending process, Mortgage Assistance Relief Service Providers, and Foreclosure Consultants are expected to be knowledgeable about and in compliance with their obligations under Maryland law when engaging in mortgage related activity, and any other applicable State or Federal statutes, rules, and regulations.
Maryland laws, rules, and regulations can be found by accessing the Annotated Code of Maryland and Rules and Code of Maryland Regulations (COMAR). Certain relevant Maryland laws, rules, and/or regulations include, but are not necessarily limited to:
- Maryland Code, Real Property Article, Title 7, Subtitle 3 (Protection of Homeowners in Foreclosure Act)
- Maryland Code, Real Property Article, Title 7, Subtitle 4 (Maryland Mortgage Fraud Protection Act)
- Maryland Code, Real Property Article, Title 7, Subtitle 5 (Maryland Mortgage Assistance Relief Services Act)
- Code of Federal Regulations, Title 12, Chapter X, Part 1015 (Mortgage Assistance Relief Services – Regulation O)