Comments on: Has the Distressed Conveyances law curtailed foreclosure rescue scams?

By: Kary L. Krismer

Kary L. Krismer — Wed, 24 Sep 2008 15:43:35 +0000

As to 16, the thing is they should have the money! They haven’t paid their mortgage for at least 5 months, if not longer. Given that, they should have the money to pay the attorney, and if they don’t then the chance of their having any good option other than a crappy sale is zero. Sometimes a crappy deal is your best deal, but at least by going to a professional you can make sure it’s the deal advertised and not something else entirely.

Craig, I don’t know if you followed my other thread on option to purchase, but I came across the more recent case of Pardee v. Jolly, 163 Wn.2n 558, where even an option to purchase transaction tied up a property for years, again seemingly where no professionals were involved in drafting the contracts. This case also involved improvements to the property, however.

By: craig

craig — Wed, 24 Sep 2008 15:13:22 +0000

Jillayne — that is ironic. A few hundred dollars on an attorney would be immensely beneficial to anyone who has been offered one of these transactions, and yet the misperception about the cost of an attorney keeps them from even seeking that guidance. Instead, they sign on the dotted line to their detriment.

By: Jillayne Schlicke

Jillayne Schlicke — Wed, 24 Sep 2008 01:49:26 +0000

oh, and to answer Sniglet’s observation that there’s no equity, what’s going on is that the scammers are figuring out who HAS equity and is also in financial distress. Sometimes these folks are ashamed, embarrased, in denial, etc., and believe there are no other options. I know it’s hard to believe but human behavior can be irrational as we all know, especially when we are in a highly emotive state.

By: Jillayne Schlicke

Jillayne Schlicke — Wed, 24 Sep 2008 01:47:37 +0000

Hi Craig,

My Realtor students today reported that the foreclosure rescue scammers are still out there contacting homeowners. Their equity skimming propositions are being presented as an opportunity for the homeowner to share in the gain, but the contracts have many provisions. One missed payment for example, and the gifts are taken away.

One of the challenges is dispelling the assumptions by Realtors and financially strapped homeowners that they’ll be able to hire an attorney, even if it’s just for, say, 2 or 3 hours for a decent hourly rate.

So many believe hiring an attorney for help is going to cost them thousands and thousands.

By: david losh

david losh — Wed, 24 Sep 2008 01:40:07 +0000

I am curious and have been thinking along the lines of how lenders will maintain the mortgage value.
You were right about lenders refusing to take more write downs.
My thought was that the loans, all loans, should be converted to thirty year fixed at 6% for full value, fully assumable.
Of course borrowers would have the option to keep the loans they have in place if they choose.

By: craig

craig — Tue, 23 Sep 2008 23:52:48 +0000

Sniglet — great point. These scams have disappeared not because of the law but because of the disappearance of equity. No equity, nothing to scam.

By: Sniglet

Sniglet — Tue, 23 Sep 2008 23:22:00 +0000

Regardless of whether this law is “good” or not, it seems as if the economic incentives for the foreclosure scams have vanished, making this a very rare crime.

I’ve heard similar things as David (i.e. that lenders just aren’t accepting many short sales anymore). Also, the fact that very few of these struggling borrowers have equity makes it difficult to pull off a fraud where you quickly re-sell the house and kick the “tenants” out, pocketing whatever equity was left.

Maybe these scams will come back if the government acquires vast portfolios of defaulted loans and becomes aggressive with short sales, but I doubt it. The government doesn’t want to see cheap homes hit the market, setting low comps, so they would likely prefer to just work out sweet-heart deals with the borrowers with substantial principal reductions.

By: Jillayne Schlicke

Jillayne Schlicke — Tue, 23 Sep 2008 02:54:29 +0000

Craig, I’ll ask my students tomorrow and report back.

By: ARDELL

ARDELL — Tue, 23 Sep 2008 01:36:50 +0000

Craig,

My limited first hand knowledge agrees that they have already closed shop as a result of the new law.

By: Kary L. Krismer

Kary L. Krismer — Mon, 22 Sep 2008 23:56:58 +0000

That article focuses more on the parts of the legislation drafted by the AG, rather than that supported by Ms. Huelsman. It’s really two separate bills, one well thought out and well written, and one not.

Also the article doesn’t really deal with recent trends, but instead just generally discusses the past five years.

Finally, the example they do give is another good example of why someone shouldn’t enter into an unusual real estate transaction without an attorney that represents them reviewing the paperwork.