Foreclosure Fraud Prevention Acts... how serious are they?

Question

I keep seeing posts about "you should be careful" and "you can get in a lot of trouble" for working with homeowners in foreclosure.

I hear people say "some states have laws" to protect homeowners in foreclosure, and "Equity Skimming laws" etc etc.

My question has two parts...

1. For all those mentioning these acts and laws, have you seen someone prosecuted recently? and recently meaning not from 2008/2009 shambles.

2. Taking the NJ act for instance.. it says "HELP PROTECT DISTRESSED HOMEOWNERS FROM UNSCRUPULOUS FORECLOSURE CONSULTANTS" - But what if you aren't unscrupulous???

I had a random person tell me "If anyone I know was approached by someone taking advantage of their situation, I would feed them to the pigs"..

My responses was.... would you rather someone like me help them to understand their situation, save their equity, avoid foreclosure.... or... let them lose everything because they listened to their family member who knows about pigs? why is it assumed everyone is there to take advantage......

While I get these laws/acts are about protecting homeowners, if someone is legitimately offering help, education, FOR FREE... how do they fall into the "UNSCRUPULOUS" category? and at the end of the day, isn't it illegal in ALL states to commit fraud, regardless of what "distressed homeowner" laws are in place or not?

In December 2022 I met a family who asked me for help. I helped them connect with California mortgage relief, helped them to understand the application and they just received $42,000 of grant relief, paid directly to their lender for the default amount. As of today, they are out of foreclosure and their next payment is due in 3 months (yes the grant paid all default plus 3 months to give breathing room). They are out of foreclosure for now but can't really afford to keep their house, they have $300k in equity, they want to look in to their reverse options, whether that can work or not, but if nothing works they want me to help them sell their house... its not in bad condition so will be a listing, but if it was a dump, and I offered them a fair discounted price, am I open to being penalized under some foreclosure consultancy laws, even though I helped them get $42,000 of help.

Tom Gimer · Answer

The "you should be careful" replies are to investors with the grand plan to save a home from foreclosure... often by taking title and then lease option back to an occupant who's already demonstrated cannot pay their mortgage. Saved!

https://www.mortgagefraudblog....

Account Closed · Answer

@John Slater: Good Questions . . . Here's the story behind the story . . .

Prosecutions come in waves.

When Subject To and Foreclosures & Wholesaling aren't in the news, the prosecutors are chasing other shiny things. To them, getting convictions, of whatever they are told to go after, gets them promoted. Inexperienced and/or greedy investors, gets these things into the news.

I think we are at the bottom of the rollercoaster, starting up a very steep hill of evictions, foreclosures and investors getting involved that will result in a lot of prosecutions. Not everyone is ethical. Even the ethical get caught up in lawsuits. It's the "accusation" that gets you sued. Then you have a long slog, about a year and a half, $25,000 in legal fees, and lost time you could have been investing.

Several things to remember about saving someone from foreclosure using Subject To. In some states it's illegal to approach someone who is in or who THINKS they may wind up in foreclosure.

Here are "Mike's Big 10" (there are plenty more where these came from.

1. The prosecutors have up to 6 years after the transaction to charge you. There are ways to lengthen that time period.

2. In the charging papers can be things like "bank fraud, wire fraud, forgery, concealment, Consumer Protection Act, theft, false inducement and so on.

3. Once you've saved someone from losing their home, they are no longer under pressure, they no longer need your help and often they are no longer your friend.

4. Often, they think you took advantage of them & they will complain to friends and family and one of them will contact an advocate "because you stole their house". "If you gouge them, they will come" after you. People burned, don't forget.

5. If two people are on the title and they split up, one almost always contacts the lender to get their name "off of title" so they can move on in life. This alerts the lender who can call the loan due. (DOS)

6. No good deed goes unpunished

7. Once you are on the Attorney General's radar, you don't leave that select group.

8. If you miss a mortgage payment you can be in deep trouble regardless of your excuse.

9. Ignoring the law (or not knowing) is no excuse in court.

10. Subject To is legal if done legally and wisely and serves a purpose.

Bottom line, get training if you are doing Subject To, especially in distressed situations and I don't mean like the "guru of the day"s generic "how to get someone to sign a contract" training.

This is serious stuff, that will affect your life for years into the future. You need real training from someone who knows how to keep you out of trouble. Each state I’ve worked with students in, WA, AZ, TX, OH, IN have different laws that you have to know.

I don’t do Subject To or any investing in CA because I don’t have the stomach for it.

Here are some reasons why it's important to follow the tightly written laws

Subject To & Wholesaling

Subject To - Attorney General sues couple AND their LLCs for equity skimming

https://www.biggerpockets.com/forums/311/topics/1140730-subj...

Lessons learned from wholesale deal turned into lawsuit

https://www.biggerpockets.com/forums/311/topics/363982-lesso...

Scammer sentenced to 20 years for real estate scheme - Can wholesalers be charged?

https://www.biggerpockets.com/forums/311/topics/1140632-scam...

Foreclosure Fraud Prevention Acts... how serious are they?

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