AUGUSTA –The Maine House and Senate approved a bill Wednesday to protect homeowners facing foreclosure from a predatory lending practice known as "equity stripping." The bill was sent to Gov. John Baldacci, who was expected to sign it into law.

Prompted by concerns over the national mortgage crisis, the measure targets a practice called foreclosure purchasing in which a company purchases the title to a foreclosed property with the intent of allowing the owner to occupy the property and repurchase the home after a set period of time.

Predatory companies purchase titles for substantially less than fair market value, then create contract provisions that make it impossible to repurchase the property. High interest rates and substantial fees involved often lead to the eviction of the homeowner and a loss of any equity that had been built in the property.

Rep. Charles Priest said the bill he sponsored is not meant to tell homeowners they cannot enter into these types of contracts. But the legislation makes clear what homeowners are getting into when they accept a company's offer to "save them from foreclosure."

"While there are honorable foreclosure purchasers who do help consumers, predatory lenders prey on homeowners in a time of desperation," said Priest, D-Brunswick.

The licensing requirements for foreclosure purchasers would be similar to those already required of supervised lenders. The bill provides for credit counseling and a right to cancel the contract within five days.

It also requires that homeowners receive 82 percent of the fair market value of the property if they have to leave the home. It creates criminal and civil penalties for lenders who do engage in equity stripping.