State, national efforts could protect homeowners from predatory liens | Betty Lin-Fisher

I’ve got some good updates about a national and Ohio effort to stop what has been called a predatory act by some companies to offer quick cash in exchange for an exclusive agreement to sell a home for 40 years.

In March, I wrote about MV Realty, a Florida company that was coming under fire across the country for its practices. The company offers between $300 to $5,000 in cash as a “loan alternative" to homeowners in exchange for an agreement to make the company their exclusive real-estate listing broker for a given period, usually 40 years.

During that time, though, if the homeowner lists the property for sale without using MV Realty as its broker or the home is foreclosed upon, or if the homeowner’s heirs try to sell the home or the homeowner wants to cancel the deal, MV seeks to be paid 3% of the property value as determined by MV Realty.

The company also takes out a lien on the homeowner’s property, issuing an additional memorandum asserting MV Realty’s exclusive right to list the house and binding the property owner to the terms of the agreement.

For homeowners, these provisions could hamper their ability to refinance their home or get a home equity line of credit. In fact, a lawsuit filed by the Pennsylvania attorney general said consumers have been turned down by banks because of MV’s liens.

And most consumers have no idea that by entering that agreement, they had this lien on their home. For my March story, I contacted several homeowners in Summit County with liens on their houses and they were shocked and angry.

But they were stuck. The liens were already on their properties.

While there was a pending Ohio attorney general lawsuit to stop the practice and a decision statewide and locally to stop recording the liens from MV Realty (and MV Realty in March told me they had temporarily stopped entering into any new agreements), that didn’t help the people who already had the liens.

Consumer advocates and the Ohio Attorney General’s Office suggested filing a complaint with the Ohio Division of Real Estate and Professional Licensing. Consumers who suspect unfair practices should contact the Ohio Attorney General's Office at OhioProtects.org or 800-282-0515.

That's still the advice from consumer advocates for people with the existing liens from these agreements.

But there’s some good news to stop future consumers from getting entrapped in these agreements and liens.

Two national organizations, the American Land Title Association (ALTA), the national trade association of the land title insurance industry, and AARP held a joint press briefing last week to discuss efforts to combat this practice by not only MV Realty but a few other companies. They call these types of agreements NTRAPS, which stands for Non-Title Recorded Agreements for Personal Service.

But the acronym NTRAPS “kind of says it all,” Elizabeth Blosser, vice president of government affairs at ALTA, said during the press briefing.

“These are agreements that are entrapping consumers for up to 40 years,” she said.

“Because a person's home is such a huge financial investment, we believe that there should not be any unreasonable restraints on the ability to finance or transfer that property due to a decade's long listing agreement.”

ALTA and AARP have been working collaboratively with other advocates to try to stop the use of NTRAPs, which they say have been in use since 2018.

“Last year, ALTA, alongside AARP, consumer advocates, industry partners, and national real estate law experts, drafted a model bill making NTRAPS unenforceable, restricting and prohibiting the recording of NTRAPS in property records, creating penalties if NTRAPS are recorded in property records, and providing for the removal of NTRAPS from property records and recovery of damages,” the organization said.

Since the model bill was drafted, 15 state legislatures have passed bills banning or limiting these agreements – including Ohio, Maryland, Georgia, and Florida.

Blosser said the bills have been passing unanimously and in a bi-partisan manner in most states. There are 20 states that have or are looking at such legislation, she said.

Additionally, seven attorney generals have sued a firm promoting this business model over its right-to-list agreements, and ALTA and AARP were able to stop a bill promoted by one of these predatory companies.

Title agents across the country have found at least 25,000 NTRAPS filed against homeowners in 32 states and there are more, Blosser said.

“Just one would be unacceptable when you’re talking about an unfair agreement that can have such a devastating impact on a consumer, “ said Blosser.

The draft legislation that has been used in many states makes the liens or NTRAPS void and unenforceable, but that’s not happening in all states that pass the law, she said.

What's happening in Ohio?

“A total of 830 of these agreements have been identified in Ohio. Ohio is one of the few states where both the legislature and the state attorney general have taken action to address these unfair business practices, and we applaud their efforts to protect Ohioans,” said Blosser.

Attorney General spokeswoman Hannah Hundley told me that in regards to its lawsuit and the pending law: “Our filling for a Preliminary Injunction blocked liens moving forward until the law is in place. Once the law is in place, which goes into effect in October, the law will block the liens moving forward at that point.”

Blosser said “we would hope action by General Yost would ultimately help those have already signed agreements” and therefore won't be covered by the new law.

She said the advocacy groups recommend “that consumers who have already signed these agreements and feel that they were not provided adequate disclosures contact their Attorney General’s Office, their county legal department, or their state consumer agency. It may also be wise to connect with legal counsel, or local community legal services.”

'They were being deceitful': Homeowners, state say MV Realty tricked consumers

Joe Fantozzi, legal counsel for Summit County Auditor Kristen Scalise, told me about remarks by  Deputy Ohio Attorney General Chip Miller about “right to list” agreements at the Ohio Recorders’ Association Spring Conference and reviewed the relevant legislation.

“He advised, and all recorders in attendance agreed, that this new legislation does not permit a county recorder to unilaterally remove a lien. Rather, it gives a homeowner a cause of action in court to have the 'agreements' declared void. That order may then be filed with in the recorder’s office and will let title examiners know that the MV Realty lien is not valid,” Fantozzi said.

“On a local level, there have not been any new agreements filed since we last spoke and we have not received any court orders to declare the existing liens void,” he said.

Fantozzi also sent me two documents releasing a local homeowner from a lien from MV Realty.

However, when I spoke to that homeowner, Wayne Goodrum, he said he didn’t negotiate any release from MV Realty and didn’t even know who MV Realty was until after he recently sold his late parents' house in Akron.

Goodrum said MV Realty took 3% of the sales price or $3,500. He was very upset because he said he never signed any agreement with MV Realty.

He doesn’t know if his parents signed an agreement with MV Realty but that would seem to be the case.

Goodrum said what the company did was the equivalent of a scam. I suggested Goodrum file a complaint with state agencies in case the lawsuit is successful and maybe there’s a way for him to get some money back.

Consumer columnist Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com

This article originally appeared on Akron Beacon Journal: Good news to protect homeowners from predatory liens | Betty Lin-Fisher