Some 1,900 Arizona homeowners have fallen for a predatory title scheme
A predatory title scheme that has come under the scrutiny of attorneys general in several states has also drawn the attention of Arizona’s AG, as well as lawmakers.
Non-Title Recorded Agreements for Personal Services, or NTRAPS, have been banned in 16 states because of the long timeframes in which they keep homeowners stuck in a contract while enticing them with a quick $500 to $1000.
NTRAPS work by offering a homeowner a free market analysis of their home, which usually comes with a payment to the homeowner to show how serious the company is in the home. As soon as a homeowner signs, they get the money, the analysis and usually forget about the interaction.
What they often don’t understand, however, is that they’ve signed an agreement that requires they use a specific company to list their home if they decide to sell it in the future — contracts often run for up to 40 years — and failure to do so means they must pay the company 3% of the value of their home.
“The acronym NTRAPS kinda says it all,” Elizabeth Blosser, vice president of government affairs for the American Land Title Association, said Sept. 20 in a press conference about NTRAPS. Blosser added that the agreements don’t just go after the homeowner, they go after their heirs. She said they’re a “scheme” to “swindle” homeowners out of their own home equity.
In Arizona, NTRAPS are perfectly legal and incredibly hard to track. ALTA believes there are around 1900 of them in the state, but believe there are likely more. The Arizona Mirror attempted to conduct its own analysis and found that NTRAPS are recorded under a category that makes them hard to track, and the companies that do them often use multiple names.
The main purveyor of these agreements is Florida-based MV Realty who has come under investigation by attorneys general in seven states. The Mirror found agreements in Arizona by MV Realty, who operates under MV Realty of Arizona, MV Realty of Arizona LLC, MV Realty of Maryland, MV Realty of Indiana, MV Realty of California and many others.
MV Realty has offered the service as a “loan alternative,” but groups like ALTA and the AARP assert that the practice mostly targets seniors who in some cases, do not outlive the agreements, which are then passed on to their children and grandchildren unknowingly.
The FCC also has gone after MV Realty for using robocallers to target homeowners to agree to NTRAPS.
Attorney General Kris Mayes’ office said it is aware of the issue and looked into proposing legislation last session to address it but it was “too late in the process to move forward.” However, a spokesman said Mayes is hoping that Sen. John Kavanagh, R-Fountain Hills, will reintroduce his legislation in the coming session. (The 2023 bill did not receive a hearing.)
Kavanagh did not respond to a request for comment for this story.
ALTA and the AARP have been spearheading legislation in multiple states to ban NTRAPS, though any ban wouldn’t affect anyone who has already signed one of the agreements.
The proposed Arizona legislation would also prohibit long-term exclusive agreements that create liens against a homeowner’s property and creates a private cause of action relating to false recordings.
However, there is also legislation created by AARP and ALTA that has been approved in multiple states across the country that similarly prohibits the agreements but is much broader than the legislation Mayes wants in Arizona, according to a memo by the AG’s Office. The AARP legislation doesn’t void MV Realty’s recorded liens, but Mayes’ draft legislation does.
“People just need to be incredibly vigilant when it comes to anything regarding their home,” Bossler said about NTRAPS, saying she thinks about how this sort of an agreement could impact her own parents financially if they ended up becoming a victim of one.
Both ALTA and AARP believe that if the issue goes to lawmakers that it will be a win as it has passed largely with unanimous support in other states.
MV Realty, the company facing the most scrutiny for these such agreements, filed for bankruptcy Friday morning.