Paramount Equity has settled their case with the Washington State Department of Financial Institutions. Read the Consent Order here. The Statement of Charges outlined many, many violations of state and federal law:
In order to go into the foreclosure rescue business, foreclosure rescuers must make themselves believe that they are helping the homeowner. This is done in a cognitive way, by attending many foreclosure seminars, reading lots of books and memorizing scripts that can be played back inside the foreclosure rescuer’s head over and over again until it becomes real and true to them.
Similar to how we fool ourselves over and over again when we say to ourselves “it’s only one drink,” “it’s only a cookie” and “it’s not really sex.” Self deception is very powerful and it appears to be working well with foreclosure rescuers. I hear many phrases over and over again such as, “it’s perfectly legal,” “homeowners want to stay in their homes,” and “if it wasn’t for me, then….” With the case of Joe Kaiser, we are starting to hear a different song. It’s the whine of the victim. You know the type of person I’m talking about who constantly complains about being victimized to the point where they transform into victim.
Joe Kaiser (doing business as PreFlop, LLC, G. Hobus Investments, LLC, Bobo Buys Real Estate, and Unclaimed Funds, Inc.) makes money selling foreclosure rescue sales courses and books (examples: ‘The Subterranean Marketplace in 2009″ for $997. “Learn How to Day Trade in Real Estate Online Using Craigslist for $667.) though not everyone has been a satisfied customer. Joe buys and sells homes in foreclosure but not just any kind of foreclosure: tax foreclosure. Some of you will remember fine movie, “The House of Sand and Fog” very well acted by Sir Ben Kingsley, Jennifer Connelly, and the beautiful Shohreh Aghdashloo. I assign this movie as extra credit for my college students because of all the possible title insurance issues surrounding the tax foreclosure plot. This movie should be required viewing for anyone thinking about entering the world of tax foreclosures.
In a very methodical way, described in his books, Joe locates homeowners who are delinquent on their real property taxes, and also have equity in their home. This is a bit like a needle in the haystack kind of work today but during the bubble run-up, as others swarmed the trustee sales, Joe focused on tax foreclosures. Interestingly, several of his victims have Hispanic surnames but I digress. Le’ts read the public records documents:
The Court found that Mr. Kaiser violated the Consumer Protection Act by soliciting homeowners with false promises to help them keep or save their home when partial interest deals do not actually result in the homeowner keeping or saving their home. The Court also found that, in the course of creating partial interest deals, Mr. Kaiser violated the Consumer Protection Act by falsifying real property excise tax affidavits and by acting as both trustee and co-beneficiary seeking a profit from the trust.
Kaiser solicits homeowners facing tax foreclosure and induces them to place their home in a trust, with Kaiser, through his business entities, as trustee and co-beneficiary. Mr. Kaiser does not pay the homeowner for their homes. Once title to the home is in Kaiser’s control, he pays the delinquent property taxes and stops the sale of the home.
The land trust…that Kaiser created give him complete title and control over the homes and leave the former owners with only two tenuous rights: 1) the right to some percentage of the sales proceeds if Mr. Kaiser chooses to sell the property, and 2) the right to occupy the property for one to three years, provided the former owner pays rent. These two rights are tenuous because the documents contain hair-trigger default provisions which void these rights if the former homeowner is even five days late on a rental payment or violates any of the other terms contained in the numerous documents Mr. Kaiser has them sign.
Mr. Kaiser testified that every partial interest deal he has created is actually in default…therefore, none of the former homeowners maintains their right to possession of the property or a percentage of the proceeds if Kaiser chooses to sell it. By virtue of the lease provisions and other contractual provisions for reimbursement of all of Mr. Kaisers expenses, his terms entitle him to receive either the entire home vacant or his share of the home’s equity without having ultimately paid any money….Homeowners who enter the transactions believing they are saving their homes are actually stripped of any ownership interest and are not even given a right of first refusal to buy back their home. No fully informed person, not acting under compulsion would enter a transaction with such onerous terms.
There is much more in the Findings of Fact and Conclusions of Law and if you want to learn how to “Negotiate Foreclosures Like a SWAT Team Leader” then by all means, meet Joe here.
There are some investors who feel sorry for Joe. Joe feels like he has been attacked by the AG’s office and is blogging about his new role as a victim. Let’s see if this logically works.
In the F&G M. transaction, Mr. Kaiser claimed he saved F&G’s home…What Kaiser actually did was purchase the home at the foreclosure sale and then had Mr. M. sign over his rights to the overage money from the foreclosure sale. As a result, Kaiser obtained both the house and the $45,428.47 in overage money he had paid at the auction. Kaiser never sold the house back to Mr. M. even when Mr. M. obtained a Realtor and made an offer. Kaiser then sent Mr. M. an eviction notice demanding Mr. M. immediately pay $2700 in rent or vacate the property.
I’m trying to work up some tears but they’re just not coming. Now it’s your turn: is Joe Kaiser a posterboy foreclosure rescue scammer, a victim, a sociopath, a combination thereof, or am I too justice oriented to become a real estate investor guru? I just can’t look at someone, flat-out lie to them, and steal their house and money. If that’s what it takes to be a real estate investor guru, count me out.
I’m closing my first conventional purchase that falls under the rules of HVCC (a majority of my transactions have been FHA) which became effective at the beginning of this month. Today I was asked by the Real Estate Agent, in disbelief:
“If I understand you correctly:
- We don’t know who the appraiser is
- We cannot contact the appraiser even if we knew. [Note: the real estate agent CAN contact the appraiser if they somehow know who it is…the loan production staff cannot].
- We have no idea when the appraisal will be done”
Yep. In a nutshell, people who are considered a part of “loan production” including mortgage originators and loan processors have no idea who the appraiser is until we receive it from said appraiser with conventional financing.
HVCC does not prohibit the real estate agent from communication with an appraiser. However, unless the appraiser contacts the agent to schedule an appointment there will be no way for a real estate agent to know who the appraiser is.
Note to Real Estate Agents: please keep this in mind when you are writing up offers with conventional financing. The mortgage originator has no contact with the appraiser and therefore, the Letter of Loan Commitment that is typically required within 20-30 days may still be subject to appraisal or the underwriter’s review of the appraisal. We can request the appraisals are provided to us by a certain date; but I cannot contact the appraiser to say “what’s the e.t.a. on the Jones appraisal; we really need it by Friday”.
Currently FHA is not following HVCC however, FHA has been adopting some of Fannie Mae’s other appraisal guidelines and addendums.
Are we having fun yet?
Some people don’t know this, but….
Gorgeous globe light at Hiram M. Chittenden locks in Ballard
I was a single mother for years until I met and fell in love with my next door neighbor in the Sunset Hill neighborhood of Ballard. Single parents develop a real knack for making every dollar stretch, and I am thankful that things have been easier (most of the time) with a husband! As we all look for ways to save money and make sure that our families are provided for, I find myself revisiting some of those older ideas.
Seattle is really a phenomenal place to live for great free entertainment, but out of town visitors will love these, too! Make sure and check out the Seattle Parks Foundation website if you have a minute, too. They have wonderful resources for all the latest and greatest in parks! This is only the first ten of these because I really don’t want to hog the whole page. Happy Seattle summer 2009!
1. Go visit the Hiram M. Chittenden locks (aka Ballard Locks) in the Ballard neighborhood of Seattle. OK, I will be honest. I am starting with my one of my very favorite places.
This was built in 1911 and serves as a passageway between the Puget Sound and the Ship Canal so that boats can travel to and from Lake Washington and Lake Union despite the huge difference in water levels. Visitors can watch as the water is raised and lowered to let boats come in and out on either side. But that is not all! The grounds are beautiful and feature extensive mature gardens and plantings. There is also a cool fish ladder on site as well as a museum/learning center. Even after any trips here, we always have fun going again! Need more free here? In 2009 from June 6th to September 7th (Labor Day) there will over 30 FREE and open to the public concerts at the Ballard Locks!
2. Museum of Flight This is one of the Seattle museums that offers first Thursdays free (after 5PM only) and is a great place to see some of the world’s amazing historic planes including one of the Air Force One planes that Kennedy flew in! This is another of my favorite places in Seattle. This museum is located in one of the early Boeing facilities and the history is just rich. There is something for everyone here and it is kid friendly. I would suggest visiting item #6 (Hat n Boots) after wards because of the close proximity. There is a good restaurant on site at the museum, but a picnic at the park is much more fun!
3. Conservatory at Volunteer Park on Capitol Hill is so much fun! The park itself is also amazing and has great paths and spaces, but I am in awe of the Conservatory building itself – 6200 square feet of plantings and displays by people that obviously know what they are doing. There are 3426 glass panes on the building. It was assembled in 1912 and has two plants in it that are over 75 years old – one of which is a giant Jade Tree. This is not your ordinary Jade plant! The Conservatory is completely FREE, though I do encourage you to throw a few dollars in their donation bin.
4.Carkeek ParkOver six miles of trails and an Education Center, large open spaces for playing, picnic facilities, a stage, wonderful 
playgrounds including a fish slide where children can slide through a salmon, plus the beach!!!! Carkeek Park overlooks the Puget Sound and is one of my favorite parks in Seattle! Carkeek Park is just North of the Blue Ridge neighborhood in Seattle and well worth the trip from anywhere in the Puget Sound.
5.Pike Place Market – You do not need a dime to go have fun here, but support these locals if you can. I love it here and could spend all day watching the hustle and bustle!
6. 
The Hat N Boots in Georgetown – I love these! How cool is it to visit some old giant boots that used to be his and hers restrooms at a gas station. According to one source when the hat and boots gas station was up and running in its previous location even Elvis stopped in once ( I am sure there are lots of Elvis sighting stories – true and untrue, but I love the idea that Elvis may have peed in that boy boot!). The good people of Seattle’s Georgetown neighborhood played a huge part in getting the Hat n Boots moved to their current location at Oxbow Park (6400 S Corson Ave.). The boots are newly refurbished, but the hat is looking sad while waiting for funds. There is a great neighborhood p-patch there with some of the most amazing plantings I have had the privilege of seeing and the playground keeps my kids entertained for quite some time, but don’t expect to be able to use the boots as a restroom today – they are for display only.
7. Green Lake – Go explore Green Lake Park – This park has it all – a 3+ mile path around the lake itself
which is perfect for biking, hiking, running, skating, and more, play space, ball fields, pool, tennis courts, and my favorite: the wading pool on the North side of the lake which is filled when it is warm. There are docks for kayak launching or you can fish off the side of the banks of the lake. There is golf here and basketball, plus bathrooms. Swimming is allowed and there is a life guarded swimming beach. Green Lake is a great neighborhood to live in anyway, but really gets busy when the nice weather hits. Green Lake is a great place to take the dog for a walk, too.
8. Fremont Troll. This is a giant troll made of concrete holding an actual VW in its hand! It is located in Fremont under the Aurora Bridge and WORTH THE STOP! The Fremont Troll is also a great photo opportunity! While you are in Fremont, take a stroll along the ship canal waterfront and visit all the great little vintage shops. There is almost always something fun going on in Fremont.
9. Alki Beach Park While I was a single mother, the tradition was to go every Sunday morning and find beach glass at Alki Beach in West Seattle and then drive up into the hills and look at the dreamy houses. Alki has some of the best views of the Downtown area of Seattle anyway and the beach glass is abundant! There is also a rough boat launch for hand carried kayaks, etc. and restrooms. Alki Beach is a 2.5 mile strip of beach and one of the closest to a California Beach atmosphere I can think of right here in Seattle complete with rollerblading and jogging patrons.
10. Take a bike ride on the Burke Gilman TrailGo basically from Ballard all the way up to Kenmore
along some of the prettiest trails and areas in Seattle. The Burke Gilman is virtually uninterrupted for the most part from Fremont to Kenmore and skirts the Western side of Lake Washington plus there are restrooms along the way.
Okay, well that is it for now with my penny pinching ideas for fun around Seattle! Even if you aren’t in the market for saving money, go and explore your city! Seattle is a great place to live and play.
#fixreplies “Drove my Chevy to the levy, but the levy was dry…”
Marshall says it best, “Goodbye People I Never Knew” <tear>
The hustle and bustle of Twitter slowed to the level of a party gone flat…no bubbly. At first people just thought everyone decided to take a nap, all at the same time. Then there was a mass uprising…but no one can see it, because you can no longer see the @replies of people you don’t follow.
Last week, Twitter added a great new feature called Trending Topics. Little did they know that the #1 Trending Topic would be turned AGAINST them and their recent decision to quiet down the party.
#1 Trending Topic is #fixreplies and here are what some of the people are saying, as they are charging up to the castle to put the stake in Dr. Twitterstein’s heart.
“Oh gee that’s right @ev & @biz don’t follow most people, so they won’t see THAT WE’RE FREAKIN’ PISSED…#fixreplies”
Checking @ev the CEO of Twitter, it would appear that they didn’t notice until #fixreplies hit #1 on the Trending Topics list, as all @ev had so say during all this was “Lunching w/@BertDecker at Yank Sing. It’s been a deem sum week.”
Talk about clueless. Did they think people woudn’t notice that someone turned off the light switch?
Seattle’s own @Shih_Wei says: “Dear @ev, the only alternative is to put the options back in users’ hands. Newcomers will figure it out, too. #fixreplies”
Some hearfelt pleas: “Twitter is now hiding messages from people you follow, if it’s a reply to someone you don’t follow. How am I supposed to discover people now? #fixreplies “
Lots and lots of complaints, like this one: “Looks like Twitter will kill itself w/ stupid un-social changes like #fixreplies “
Given the comment above, maybe the post should have said The Day Twitter Committed Suicide.
Some of the Coders who write Twitter Apps, like Seattle’s @dacort see it as an opportunity: “dacort Twitter taketh away, and small angry developers will provideth. http://ff.im/2Qd4Z“
I’m going to go to sleep and hope I will wake up to find it was all just a bad dream.
While many of you may already know that May 15th is Starbuck’s Bike to Work Day, you may not know that there is an After-Party!
“On Friday, May 15 from 4 p.m. to 7 p.m. 22nd Avenue is being opened up and connecting to Bergen Place Park creating one large park. Cascade Bicycle Club has partnered with the city to make this a great event.”
More info included in the links in the first paragraph. If you are driving on May 15th, be aware that there will likely be a lot more bike traffic than usual, and be careful out there.
This Saturday, May 16th is Curb Day. Apparently this is a new concept that is picking up some steam across the Country.
Saturday, May 16, 2009, people all over will participate in “Curb Day
Spencer Rascoff, COO of Zillow, does a pretty good job with the questions thrown at him by three on CNBC.
Zillow’s color coded U.S. Map of % down per City begs the question, “Are you black and blue from the housing crisis?”
I attended a foreclosure auction in Bellevue, WA last week to discover if the rumor was true that banks are opening their bids below the amount owed. I received confirmation from three professional investors that yes, the banks have been doing that, it’s no secret, and there seems to be no discernable pattern. It’s not one particular bank or lender, it’s not particular types of property or in any specific area. It appears to be random.
In addition to the 92 active trustee sales scheduled for that day in Bellevue (auctions were also going on in other King County locations,) there were 81 postponements. Only a few of the trustee sales attracted bidders, and the rest were deeded back to the bank. Out of the 92 active sales, 25 had opening bids below the amount owed to the bank.
Why would a bank or lender set their opening bid below the amount owed?
Banks and lenders have duties to their shareholders and investors to maximize profits and miminize losses (well, at least they use to.) If opening bids are set LOWER than what’s owed, perhaps the banks have already tallied their losses, realized that if they had to take back the house, get it cleaned out and cleaned up for resale, pay a real estate agent their commission to sell it, pay for title, escrow, excise tax, utilities, and any other carrying costs, they might as well sell it at a discount at auction. But maybe there are other reasons. I wondered if the banks were trying to keep more REO inventory off the market in an attempt to prop up home values for their existing REO inventory. Maybe appraisers can ignore trustee sale prices in their reports. Not knowing the answer, I emailed three appraisers for help and here’s what I learned: Appraisers need to mention trustee sales in the neighborhood if these trustee sales make up a significant percentage of available comps because they are legitimate sales even though title is transferred using a trustee deed instead of a warranty deed. If an appraiser choses to ignore these, he/she will run the risk of having the appraisal run through an “enhanced review” process in order to catch trustee sale market activity. If a trustee sale is a significant comparable sale, it can be used. The requirement to use closely comparable trustee sales as comps can also vary based on the requirement of the lender and investor. It may not be absolutely required but it may be in the appraisers best interest to mention trustee sales. Thanks to Jonathan Miller, Shane Leady and Richard Hagar for teaching me something new today.
That still doesn’t explain the phenomenon of banks undercutting their own principal balances at the auction. My theory is that banks are relying on third party information such as a mini appraisal or Broker Price Opinion (BPO) prior to auction. If the BPO suggests that the outstanding principal balance is so high and out of range as to likely attract no bidders at auction, then the banks have nothing to lose by setting the opening bid closer to or significantly lower than the principal balance owed. If no one bids at auction, they’re still only out the money they would have been out anyways and on the upside, if the low opening bid attracts investors, then perhaps the bidding will rise closer to the payoff. If not, they have an immediate loss that could be significantly LESS than losses that would add up over time, having to carry the REO on its books for months of marketing time in addition to the other costs mentioned above.
If banks are undercutting their own payoffs, then why isn’t this phenomenon more widely publicized? Okay, so we know that bidding on a home at a trustee sale is too frightening for most first time homebuyers but still, if more people know about this, then maybe there would be more folks showing up at the trustee sales and bidding those homes UP, thereby reducing the banks losses. There certainly is NO shortage of tall, well-groomed, good looking, muscular investor gurus in shorts showing off tanned legs, even though it was only 63 degrees outside hanging out at foreclosure auctions with all kinds of downpayment solutions to offer newby real estate investors: “We have zero down financing available for the right investor!” and “We have private hard money financing available for your purchase and you can refinance out of that loan in 30 days….My mortgage broker is right here, let me introduce you to her.”
Maybe the banks aren’t publicizing their low bids because they don’t want to bring buyer attention away from purchasing their REOs or short sales, knowing that investors are the ones who typically show up at the auction anyways. The banks also have a vested interest in keeping traditional buyers focused on MLS listings.
If I owned stock in a bank or lender that was undercutting their own payoff at auction, I’d want to be darn sure that this practice was saving the bank money and not hiding something else such as higher losses to be pushed on into the next earnings report…or the next stress test.
Foreclosure Auction Video Part 1
April 24, 2009
Bellevue, WA
Here is the rest of the auction.
Special thanks to Phil Leng for introducing me to all the investor bidders.
Spencer Rascoff, COO of Zillow and his daughter Sophia showing us how easy it is to use the new Zillow iPhone App. I love her happy dance…especially the second one.
Even a four year old knows it is disappointing when there is “only one picture”. What a bright little cutie!