HB 2791

In February 2008, the HB 2791 was passed. It further confirms what we've been saying all along about the dangers of "deed assumptions" and "leasebacks" for investors.


Equity skimming is defined. "Equity skimming" practices are used to obtain title to properties for the purpose of either taking the equity out of the property or obtaining rents or payments on the property without satisfying any of the underlying obligations that may exist on the property.


A distressed property conveyance is a transaction in which: (1) a foreclosed homeowner transfers an interest in the distressed property to a distressed property purchaser (DPP); (2) the DPP allows the foreclosed homeowner to occupy the property; and (3) the DPP or a person acting in participation with the DPP conveys or promises to convey the property to the foreclosed homeowner; or provides the foreclosed homeowner with an option to purchase the property at a later date; or promises the foreclosed homeowner an interest in, or portion of, the proceeds of any resale of the property.


A DPP must either (1) ensure that title to the property has been reconveyed to the foreclosed
homeowner; or (2) make payment to the foreclosed homeowner so that the foreclosed homeowner has received consideration in an amount of at least 82 percent of the fair market value of the property as of the date of the eviction or voluntary relinquishment of possession of the property by the foreclosed homeowner. "Consideration" is defined, and includes unpaid rent owed by the foreclosed homeowner before the eviction or voluntary relinquishment, reasonable costs paid to independent third parties necessary to complete the distressed property conveyance transaction; payment of money to satisfy a debt or legal obligation of the foreclosed homeowner, or the reasonable cost of repairs for damage to the distressed property caused by the foreclosed homeowner.

A foreclosed homeowner has the right to cancel any contract with a DPP until midnight of the
fifth business day following the day the foreclosed homeowner signs the contract, or until 8:00 AM on the last day of the period during which the foreclosed homeowner has a right of redemption, whichever occurs first.