In February of 2007 the Home Equity Theft Prevention Act (HETPA) passed the New York State Legislature, attempting to stop scam artists from stealing or tapping the equity of victims’ homes. HETPA had two principal areas of concern: the substance of transactions involving persons in distressed circumstances selling their homes and the inadequacy of foreclosure procedures to inform defendants of their rights and remedies. The substantive portion of the statute1 principally allows homeowners at distressed sale conditions to rescind the sale within two years thereafter. The procedural portion of the enactment,2 calls for foreclosure pleadings to have attached to them precisely worded notices setting forth some options the defendant might have.
Despite its good intentions, HETPA’s anti-consumer effect easily makes it the worst real estate statute currently on the books.3 Initially a best friend to debtors, HETPA became anachronistic the date lenders began diligently examining whether borrowers could afford the loan and tightening their credit standards. However, HETPA continues to endanger sales to investors who may be forced to relinquish the home if the seller opts for rescission. Investors now seeking to invest in distressed properties, must do so without title insurance or with a policy that excepts HETPA from the coverage. For those who forego title insurance on these deals or for those title companies that insure these sales, the monetary losses could be enormous. For a significant proportion of deals, HETPA can be keeping investors out of the market. By keeping investor-purchasers off the market, HETPA significantly curtails the number of buyers distressed sellers can turn to for relief, severely harming their chances for relief from deals they can no longer afford. On the procedural side, HETPA keeps defaulting borrowers ringing up charges they can ill afford. That notwithstanding, until HETPA is repealed, transactional attorneys need to know the common law that has developed under it.
Few Reported Decisions
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