Investors must follow foreclosure rescue rules

POSTED: Monday, April 28, 2008

by Brad Carlson

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Legitimate “foreclosure rescue” companies don’t attempt to get a distressed home’s deed, said Meridian-based attorney Lance Churchill, who teaches real estate investment and asset protection through his Frontline Seminars entity.

Idaho does not regulate foreclosure consultants specifically, he said. Foreclosure rescue is subject to Idaho’s consumer protection laws, and to some extent its credit repair laws depending on how a company advertises, he said.
“If they are truly a foreclosure rescue company, the deed is never going to change,” Churchill said. The rescue company will help the homeowners “solve the problem” through approaches such as modifying the loan, setting up a payment plan, or arranging “short” sale wherein the lender agrees to accept less than the amount owed. “They should merely act as negotiator for the homeowner, with the lender.”
One increasingly common approach – which sometimes is called “foreclosure rescue” but technically is not – involves investors, he said. The investor seeks out a homeowner who is in default or some stage of foreclosure. The homeowner transfers the deed to the investor, who tries to sell the home before the foreclosure is completed.
If the home sells, the investor takes any profit, the borrower gets whatever compensation agreed to at the outset, and the default or foreclosure process is stopped, Churchill said. But if the home does not sell, the foreclosure is completed in the name of the original owner, he said.
The party that holds the deed has the right to sell, but “transferring ownership does not eliminate liability for the loan,” he said.
“All of it is pretty much legal, as long as it is disclosed and there has not been any misrepresentation,” Churchill said.
Idaho Attorney General Lawrence Wasden and state Department of Finance Director Gavin Gee in mid-2007 jointly issued a warning about foreclosure-rescue schemes.
Absent fraud or deceptive practices, Idaho law will not protect people from pitfalls such as giving up equity or overpaying to rent or repurchase the home, Wasden said in the release.
Gee recommended borrowers contact the lender as soon as they encounter trouble making their mortgage payment. While that process is underway, they should seek input from established organizations such as certain government agencies, legal assistance groups, and licensed credit counselors.
More investors now seek to acquire houses through a short sale for less than the amount owed, Churchill said. This gets the borrower out of the foreclosure process and the loan. The borrower may have tax liability on the forgiven debt, but a December 2007 federal law forgives that debt in most cases, if the home is the borrower’s personal residence, he said.
About half of home sales in California are short sales now, because of price declines and buyers’ heavy usage of 100 percent financing, Churchill said. In southwest Idaho, about 6 percent of total listings in Ada and Canyon counties are short – a percentage that will rise as long as prices are flat, he said - compared to less than 1 percent a year ago.
Real Estate Marketing owner-broker Patty Haney, based in Boise, a decade ago started specializing in marketing distressed properties.
She sees an increase in the number of people offering courses on marketing, and investing in, distressed properties. She also sees an increase in the amount of misinformation disseminated on short sales.
“They think that all they have to do is get a party in default and ask the lender to take less,” Haney said. “So they submit low-ball offers to the lender.”
Now, lenders have so many short-sale proposals under consideration that it can take two to four months to analyze and process one, she said. “Most of the time the low-ball offers get kicked out. As a result, (borrowers) are out of time, and then the property goes through the foreclosure.”
Some houses that could have been sold with appropriately priced short offers now instead go through foreclosure, because of ramped-up investor activity over the last 18 months that inundated lenders, Haney said.

4 Comments

Please provide contact information for Patty Haney in above article on foreclosure rescue rules
Comment By interested
Monday, April 28, 2008 @ 6:41 AM

Thank you for this article! Finally, someone writes the "real deal" about the "foreclosure rescue" topic!
There ARE "bad guys" out there who would hurt homeowners facing foreclosure!
There are also a lot of "good guys" reaching out to homeowners to help them during this hard time!
The lawmakers then lump all the "good guys" with the "bad guys" and make laws that prevent the "good guys" from helping homeowners at a time when they need us the most!
I faced foreclosure myself several years ago. I solved my problem, but what a hassle! Once I figured out how to save my home, I helped hundreds of homeowners all over Wisconsin (where I live) with their foreclosure problem!
As word spread, I wrote a book and started teaching others all across the country how to help distressed homeowners.
Then I wrote another step-by-step, easy to follow guide, "Homeowner's Do-it-Yourself Guide to Save Your Home" and it has a CD that talks a homeowner through the process. We will also provide one-one help, too!
I have called the "government" agencies to see how they help a homeowner facing foreclosure. Sad to say, they really don't help. Here's what they do: a homeowner calls them. They take financial information from the homeowner. They fax the info to the lender. THAT'S IT! They expect the homeowner to call the lender and work something out! There are a number of things wrong with this picture:
1. A homeowner is DESPERATE to keep their home! They will give minimal financial information to make it look like they CAN afford to keep their home.
That is absolutely the WRONG way to go about it! The lender will use that information and make a plan based on unrealistic financial criteria! It DOOMS the homeowner to failure! Foreclosure (and all the related costs, including more attorney fees) starts again and the home is lost!
2. It can take a long time to reach the right people at the banks to talk to work something out! A homeowner needs to go to work so they can make money so they can make their house payment. They don't have time to sit "on hold" trying to figure this out. Having a professional "good guy" help them is what we do! It's our JOB to sit "on hold"!
3. Because of the time consuming process, every day that goes by, a homeowners is charged additional late fees, attorney fees and other related foreclosure costs! The amount they owe keeps growing! When a professional "good guy" is hired, we get the job done in a timely manner, thus reducing the amounts the homeowner is charged by the lender and their attorneys. A good portion of the fee that a "good guy" charges is often "off-set" by the fees the lender is charging against the homeowner. I tell my clients, "Wouldn't you rather pay someone working for you rather than working against you?". Of course, that just makes sense!
I totally agree with the article that states; “All of it is pretty much legal, as long as it is disclosed and there has not been any misrepresentation,” Churchill said.
The problem isn't necessarily the "tactics" used to help homeowners, the problems for the homeowner are:
1. Separating out the "good guys" from the "bad guys"
2. Disclosing the "real deal" of the options that are available.
Many homeowners didn't understand the "real deal" when they bought their home in the first place. How are they going to understand the "real deal" in times of distress? That's why a caring "good guy" is there, we are there to educate, empower and help a distressed homeowner figure out what their best options are AND help them through whatever they choose to do about their situation! Our motto:
"Helping You Today Improve Your Tomorrow!"
We offer a FREE Report: What to Watch Out for When a Foreclosure is Filed Against You!" It's available at the following link:
http://nationalhomeowners.homestead.com/
Thank you.
Sincerely,
Laura Schuster
Comment By Laura Schuster
Monday, April 28, 2008 @ 8:44 AM

Patty Haney's firm, Real Estate Marketing, is listed at 375-7725.
Comment By Brad / IBR
Monday, April 28, 2008 @ 10:25 AM

Lance Churchill and Frontline Seminars are a great source for this article. I have attended three of Lance's foreclosure trainings and they are the "real deal". He teaches legitimate strategies for Pre-Foreclosure and Short Sales for real estate agents and investors. All honest legal strategies that actually HELP the homeowner in Foreclosure. Thanks again Lance for all your knowledge and information.
Check out their site
www.frontlineseminars.com
Comment By David
Monday, April 28, 2008 @ 4:16 PM

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