The Home Equity Theft Prevention Act (“HETPA”) has been in effect since February 1, 2007. Its purpose is to protect distressed homeowners from potentially fraudulent “foreclosure rescue” programs by ensuring that the landlord has enough information to make an informed decision about transferring title to their home (see Chapter 308 of the Laws of 2006 for the Legislature’s statement of purpose). HETPA is encoded in
RPL 265-a and RPAPL 1303.
The circumstances under which HEPTA will apply can be summarized as follows:
a natural person (called a “Stock Seller”) enters into a contract (called a “Covered Contract”) to sell their primary residence to a buyer (called a “Stock Buyer”) whose residence consists of land improved by one to four family dwellings and (i) the premises are in foreclosure (as defined below) or (ii) the seller of shares is in default (as defined below) under the financing secured by the premises and the covered contract includes an agreement of refund (as defined below).
There is little confusion regarding the first three requirements: for HETPA to apply, the seller must be a natural person who is the record holder of a one- to four-family home, a unit of which “the equity seller occupies u he occupied at a time immediately prior to the sale of shares as his primary residence. ” RPL 265-a (k).
The act becomes more complicated with respect to the circumstances that comprise a Covered Contract and what is mandatory for transactions consisting of Covered Contracts. The following diagram will help in the analysis of this part of the act.
I. As a main condition, the contract must be “incident” of the sale of premises that are in foreclosure or in default (as defined). Although this suggests that the transaction, to be defined as a Covered Contract, must arise out of foreclosure or default, the safe approach is to analyze any transaction where the seller is in default or in foreclosure to verify HETPA compliance. .
Furthermore, according to RPL 265-a (e) the term “Capital Buyer” does not specifically include a person or entity that acquires title in the following manner: (i) for use as a primary residence (natural persons only); (ii) by the arbitrator’s deed in an Article 13 foreclosure sale or in any sale of property authorized by law; (iii) by order or sentence of any court; (iv) of a spouse, or of a parent, grandparent, child, grandchild or brother of said person or of said person’s spouse; (v) as a non-profit housing organization or as a public housing agency; or (vi) a bona fide buyer or security lien.
Therefore, a purchase in the above circumstances is not subject to the act. The key exceptions to the law here are that, in addition to sales sanctioned by the government, nonprofits and relatives, anyone who purchases the premises to use as the buyer’s primary residence and any bona fide or lien buyer for value is not considered a Buyer of shares. Transactions involving the above are not covered by law.
Pursuant to RPL 265-a (e), the term “bona fide buyer or lien of value” includes “any person acting in good faith who purchases the residential real estate from Capital Buyer in exchange for valuable consideration or provides the Principal Buyer with a mortgage or provides a subsequent bona fide buyer with a mortgage, provided that you have not received notice of the seller’s continuing interest in, or interest in, the property prior to acquiring the title or lien, or any violation of this section by Capital Buyer in connection with the property in question. “
II. Once the above threshold is reached, one of two conditions must also exist for the transaction to be covered by HETPA.
(a) If the facility is in foreclosure, any contract for the sale of the facility will be considered a covered contract subject to law. HEPTA defines foreclosure in the sense that “there is an active lis pendens filed in court pursuant to article thirteen of the Real Property Actions and Proceedings Act against the property in question, or the property in question is listed sale of asset tax liens “(emphasis added).
(b) Alternatively, if the seller of shares is in default (as opposed to foreclosure), then a contract to sell the premises will only be considered a covered contract if it contains a repayment agreement. A seller of stocks is considered to be in “Default” if they are two months or more behind in their mortgage payments. HETPA defines a “Redemption Agreement” as an agreement whereby the Buyer of Stock agrees to return a share in the residence to the Seller of Stock to allow the Seller of Stock to regain possession of the residence. Although the Rebate Agreement can take any form, typical structures include sale / leaseback agreements or the granting of a buyback option. HETPA also states that an agreement whereby a seller of shares mortgages a primary residence to a buyer of shares can also be considered a repayment agreement. However, the law does not clarify what type of arrangement is the goal of this language.
III. If the above circumstances exist, the contract of sale should be treated as a Covered Contract. The main implication of the coverage of the law is that the seller of shares is entitled to five days of cancellation of the covered contract (RPL 265-a (5)). The Buyer of shares must, within ten days of receiving a notice of cancellation, “return without condition any original covered contract and any other documents signed by the seller of shares, as well as any fees or other consideration received by the buyer of shares of the seller of shares “. . The cancellation of the contract will release the seller of shares from all obligations to pay fees to the buyer of shares. “Identification.
IV. To ensure that the protection under the law is in effect, HETPA establishes several requirements (see RPL 265-a (3) – (7)). These include the following:
(a) The Covered Contracts must contain the complete agreement of the parties, including: the total consideration; a full description of the payment terms or other consideration; the moment of delivery of possession; the terms of any rental or lease agreement; the terms of any return agreement;
(b) Covered Contracts must also include a legal Cancellation Notice form and specific legal language advising the Stock Seller of their right to cancel (These forms can be found in RPL 265-a (6) (a) and (4) (i) respectively;
(c) All Covered Contracts and the attached Cancellation Notice must be written in bold at least twelve points, in English or in English and Spanish if Spanish is the primary language of the stock seller;
(d) HETPA prohibits the Share Buyer from engaging in certain activities during the five-day rescission period. See RPL 265-a (7) (a).
(e) The law also restricts the information and representations that a Stock Buyer may make to a Stock Seller at any time. See RPL 265-a (7) (b) – (d).
You cannot waive the provisions of HETPA. RPL 265-a (17).
V. The true teeth of HETPA come in RPL 265-a (8), which states that any transaction that substantially violates its provisions “is voidable and … may be terminated by the seller of shares within two years after the date of registration of the transfer of the residential property “. To terminate, the seller of shares must give a Notice of Termination to the Buyer of Shares and its successors in interest (other than bona fide buyers or liens, described below) and register the Notice of Termination with the registry office. County in which the property is located.
Therefore, any Capital Buyer who does not comply with the HETPA in connection with a covered transaction is open to cancellation of the transaction for up to two years. Of course, it is likely that, at that time, the premises were sold to a third party. HETPA states that the two-year cancellation right will not affect anyone’s rights (as defined above). See RPL 265-a (8) (c).
SAW. Another protective measure that HETPA provides, which is unrelated to its provisions regarding Covered Contracts, is the addition of RPAPL 1303, which requires the plaintiff in a foreclosure action to include a notice titled “Help or Homeowners in Foreclosure mortgage “. with the summons and complaint notified to the accused. (This form can be found in RPAPL ยง1303).
The notice must be on a separate page of colored paper in bold, fourteen point type. Note that HETPA does not specify the types of property classifications for which the notice must be included.