LEWISTON – A single mother in an Androscoggin County town decided to buy a mobile home in 2005. She financed purchase and installation of the home through a conventional lender, despite the high closing fees. She was told her construction loan would convert to a permanent mortgage after she moved in.

When a year had passed, she checked back with the mortgage broker who told her the lender no longer financed her type of mobile home and that she would soon need to pay off the total loan amount.

Then her broker found a new source of money for her to tap into.

She signed papers believing she was refinancing the loan on her home. She wasn’t. Instead, she had unwittingly signed over its title. She had signed a contract agreeing to lease/purchase the property in order to buy it back, including a balloon payment that was unaffordable to her. Now in default, she wrote to Maine’s Bureau of Consumer Credit Protection, asking for help.

Consumer protection officials said they are seeing a rise in the number of investors who prey on unsuspecting property owners facing foreclosure. Seeking rescue, they end up victims instead, losing their homes and any remaining value.

The Sun Journal filed a formal request with the state’s consumer protection agency for complaints about the practice known as “bond for deed” or “buy out-lease back.” The names of the consumer and the lender in the woman’s letter had been redacted.

According to state regulators, the company that acquired her home is working with the woman to restructure the agreement.

What the company did in this case likely was legal in Maine. State Rep. Charles Priest, D-Brunswick, thinks that’s a problem.

Priest, a lawyer, was reading a story in The New York Times about homeowners facing foreclosure who thought they were being helped by a business to avoid losing their home. In fact, the would-be rescuer turned out to be a predator who had the homeowner sign over the deed, then sold the house to someone else.

“This was a concern to me,” Priest said.

He called William Lund, superintendent of the Bureau of Consumer Credit Protection, to find out whether the same thing was happening in Maine. Lund said he knew of a half-dozen instances. Since then, the number has doubled.

Several states have tackled the problem. Remedies have varied.

In Minnesota and New Hampshire, the practice of buy out-lease back – also known as bond for deed – has been regulated. Consumer protections include:

• a written contract that spells out in detail the terms of the transaction;

• limiting fees a company can charge for the transaction; and

• a period during which a consumer can cancel the transaction.

Massachusetts took a more drastic step, outlawing the practice altogether.

Priest said he’s leaning toward a more moderate approach, like that taken in Minnesota and New Hampshire.

In some cases, an arrangement that involves selling a home and buying it back can actually benefit the consumer, he said. In those cases, however, the consumer should understand exactly what the transaction entails, Priest said.

He said his bill follows on the heels of an anti-predatory lending law sponsored by Maine House Speaker Glen Cummings and passed by the Legislature the last time it met. That law was aimed at protecting consumers from unscrupulous subprime market lending practices. It requires that consumers receive any needed financial counseling and turns the tables on the lenders, holding them responsible for the financial interests of the homeowners borrowing their money.

The Legislature is expected to take up Priest’s bill when it reconvenes in January.


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