Attorney General: New borrower notice protects home-buyers

Lender must provide letter about borrower rights, through law taking effect Jan. 1

INDIANAPOLIS, IN - Hoosier home-buyers will get an official notice of their legal rights from mortgage lenders under a new state law that takes effect Jan. 1, 2010.

"This official notice that all mortgage lenders now must provide to borrowers will help educate home-buyers of their legal rights at a stressful time," Indiana Attorney General Greg Zoeller said. “Sometimes home-buyers have significant concerns but lack sufficient opportunities to raise questions prior to the closing."

The notice is posted online on the Homeowner Protection Unit (HPU) section of the Attorney General’s web site at http://www.indianaconsumer.com/homeowner/pub/BorrowerNoticeForm.pdf.

Established in 2005, the HPU investigates mortgage fraud, predatory lending and deceptive acts. Deputy attorneys general within the HPU can file civil lawsuits and licensing complaints against real-estate salespeople, appraisers, brokers and foreclosure consultants who violate state laws. Part of HPU’s mission is to educate homeowners about mistakes to avoid in purchasing or refinancing a home.

“Buying a home is the single largest purchase most people ever make. If consumers understand they have one business day to review the closing papers before signing, and three business days to cancel the sale after signing, then our hope is they will be better informed before they overextend themselves on a mortgage loan,” Zoeller said.

The requirement that mortgage lenders provide a borrower notice is included in the state’s new mortgage-reform law, House Enrolled Act 1176, that the Indiana General Assembly passed in April. Most of its provisions took effect July 1, 2009. Among other things, the law adds new penalties on those who illegally influence real-estate appraisals, and it prohibits prepayment penalties that prevented homeowners with adjustable-rate mortgages from refinancing.

One portion of the new law that has some enforcement through the Attorney General’s Office is triggered to take effect Jan. 1, 2010.

Starting Friday, mortgage lenders will be required to provide borrowers going forward an official notice of their legal rights in the closing. In wording mandated by the new law, the official notice advises that:

• Borrowers in a real estate transaction have the right to inspect settlement documents the business day before the closing date.

• Improperly influencing a real-estate appraiser on the value of an appraisal is illegal.

• Any borrower who suspects they have been a victim of a fraudulent real-estate transaction can contact the Attorney General’s Homeowner Protection Unit at 1-800-382-5516 or by email at HPU@atg.in.gov.

“Hoosier home-buyers ultimately will benefit from the greater transparency the new law creates,” Zoeller said. “We anticipate we will receive more consumer complaints about mortgage fraud after Jan. 1, once this notice requirement takes effect.”

Visit the Homeowner Protection Unit web site, http://www.indianaconsumer.com/homeowner/index.asp, to find useful tips for borrowers on how to avoid falling victim to mortgage fraud or foreclosure-rescue scams.

The Attorney General’s Office supports the Indiana Foreclosure Prevention Network or IFPN, a nonprofit housing-counseling partnership in which homeowners at risk of foreclosure can receive assistance from certified counselors and trained pro bono attorneys. For more information about assistance from the IFPN, visit www.877gethope.org or call toll-free 1-877-GET-HOPE.