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Pinkerton I Need You On This One!


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#1 Guest_Bev_*

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Posted 17 December 2003 - 10:36 AM

Hi guys, I told you I would stop by off and on... (luv you all)

Pinkerton, have you or anybody seen this article about sub2's, (man I need to stablish a relationship with a R.E attorney PRONTO!).....


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Media Releases
FOR IMMEDIATE RELEASE

November 26, 2003

AG FILES AGREEMENTS WITH OPERATORS OF 'DISTRESSED PROPERTY RESCUE SCHEMES'
Attorney General Hardy Myers today announced the filing of agreements with two Oregon businessmen, who solicited homeowners at risk of defaulting on their home mortgages with promises of cash buyouts that rarely happened. Named in Assurances of Voluntary Compliance filed in the circuit courts of Marion and Washington Counties, respectively, are Stephen Seal of Portland and his business Radius Corporation and Jack Alloway of Beaverton, who does business as Rapid Equity Services, LLC. The assurances admit no violation of law.

"A large percentage of these types of ‘distressed property rescue schemes’ appear directed towards vulnerable homeowners such as the suddenly unemployed, the elderly, couples in divorce proceedings and non-English speaking homeowners in financial straits," Myers said. "Homeowners sign away their equity and interest for the often false promise of being able to get out from under their mortgage. Oftentimes, the company gets control of the property while the seller remains liable on the original mortgage."

Department of Justice investigators found that Seal and his business, Radius Corporation, pitched a quick sale for cash to a Tualatin couple, who needed to sell their Oregon home quickly and move back to family in Tennessee. The actual transaction involved the homeowner placing their property in a trust and then signing over their beneficial interest in the trust to Seal’s company. As a result, the company gained control of the property but the homeowners remained liable on the original mortgage. The homeowners complained that payments and taxes were not made timely and they sought the return of their property.

Jack Alloway of Beaverton, who does business as Rapid Equity, devised a similar scheme after attending seminars and watching late night television to learn how to manipulate the subtleties of real estate law to his financial advantage. Alloway targeted single-family homeowners, who perceived themselves in desperate need of relief from the obligation of their mortgage payments. Alloway also initially offered to purchase a home for cash but soon reneged on the offer.

Alloway offered homeowners a solution to their problems by persuading them to place their property in a trust and promising to pay all loan obligations and to assist in promptly finding and qualifying a buyer to purchase the property, thus releasing the homeowners from their mortgage obligation. This complicated scheme left consumers liable on the original mortgage while transferring ownership of the property to a trust that was controlled by Alloway.

Such schemes pose a substantial risk to homeowners, who sign away their beneficial interest in their home, while continuing to carry the mortgage obligation, which shows up on credit reports as a huge debt. And while the tenant or a potential buyer maybe making loan payments and paying the taxes, the homeowner has no control over the timeliness of these payments. If the tenant defaults, the homeowner has no recourse.

Under the Marion County Assurance of Voluntary Compliance, Seal

paid $1,500 to the Department of Justice consumer protection and education fund and promised not to offer cash buy-outs when they weren’t available. Seal also promised to not provide references knowing that they were disenchanted with his program.

Alloway agreed to not misrepresent the nature of any real estate transactions and pay $500 to Justice. If Alloway doesn’t meet the terms of the AVC, he must pay another $6,500 to Justice.

Attorney General Myers warned homeowners that "distressed property rescue schemes" are not regulated by a government agency and must be carefully examined before participating in them. Justice officials offer the following tips to consumers:

If you are thinking about selling your home because of financial duress, consider options such as renting out the property yourself to make mortgage payments.
Remember that a company that offers to find a buyer for you won’t have any greater luck than you at the outset in disposing of the property and it may take a long time to find or qualify a new buyer.
Be careful; see an attorney or a licensed real estate professional if you are giving up control of your property but remaining liable on the mortgage loan.
Even though an arrangement may appear to avoid a default, you give up control over making sure mortgage payments and taxes are paid on time, which means there is still a potential for default and your credit could be decimated.
There is a risk that the lender, particularly if interest rates are rising, will exercise a "due-on-sale clause" if the lender discovers that you no longer have a beneficial interest in the property and you are no longer living in the home.
Even if the seller avoids default, the seller may not be able to get credit since the seller still has a huge debt.
Consumers wanting more information on consumer protection may call the Attorney General’s consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only), and toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us.

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Bottom line is that no CREI is illegal, but FRAUD is..

THis sure gives the rest of us investors a bad name :blink:

Bev

#2 pinkerton

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Posted 17 December 2003 - 12:11 PM

Hey Bev,

We knew you couldn't resist us. :blink:

A phone call or letter from the Department of Justice can ruin your whole day...not to mention business! :D

I think your bottom line is correct...investing is legal, fraud is not. As I stated in the disclosure discussion, it's in everyone's (short and long term) best interest to go about this business in a thoughtful manner. The "runners and gunners" stand to lose their shirt, and they sully the reputation of the investing community.

I wish there were black and white answers to these issues, but there aren't. Each investor has to think it through and decide what they can defend (with a straight face) if taken to task by law enforcement (as in the article you posted) or a client.

"Be careful out there!"

Mike P. :D

#3 Guest_Bev_*

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Posted 17 December 2003 - 01:06 PM

Hey Bev,

We knew you couldn't resist us. :blink:

:D You know me too well Pinkerton,

So, legal-wise and / or technically-wise (from investor's part) how do you see or think that this whole thing could have been avoided (other than the logical) that the investor failed to do OR not to do in the Sub2?

Gracias :D

#4 pinkerton

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Posted 17 December 2003 - 02:10 PM

Bev,

Although its always hard to tell from press releases, I think that a healthy dose of (I hate to say it) disclosure would have gone a long way in this situation. I say this because where disclosure is minimal or non-existent, and the client is financially distressed, then it looks like the investor is over reaching.

Mike P. :blink:

#5 Guest_Bev_*

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Posted 17 December 2003 - 03:06 PM

Thanks Pinkerton,

I would think that "disclosure" would apply to all techniques and I agree.
I'll look into this subject deeper.

Stay Tunned

#6 mpine

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Posted 17 December 2003 - 04:51 PM

As a Mortgage Professional I hear horror stories of Do On Sale clauses all the time, and they usually start with something like...

"I don't know why the loan was called due, i recieved a letter in the mail threatening legal action."

Then generally upon follow up you find out that they didn't make payments for 3 months due to not being able to find a T/B to fill the property and they did not live up to there contracts or there word. So the bank starts to do there research before filing for forclosure and they discover the change in title they may have never seen otherwise.

Just because there is a story being told does not mean you are hearing the whole story.

Mike
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Michael Pine
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#7 MichaelC

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Posted 17 December 2003 - 09:50 PM

At the risk of raising the hackles of the Subject To crowd, I have felt all along that technique is rife with potential problems from the get go, both for the seller and for the investor. And it is especially perilious for the new investor. Your cash reserves must be plentiful. And the paperwork is onerous.
And what happens to the seller when the loan, still in their name on a property that no longer is, gets called in because the investor can't or won't make the payments? Do you really think that the various CYA letters that are being offered as your legal safety net are going to hold up when the previous homeowner begins to tell how he was taken advantage of by the fat cat investor. Who do you think will get the sympathetic ear from the Feds, judge, and jury?

#8 Guest_Guest_*

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Posted 18 December 2003 - 12:43 AM

Mike,

I agree. I'm sure that a lot of problems are caused by other parties not disclosing information that they should. All the investor can do is ask, document what was told to them and go from there.

The more important issue is how investors can stay out of trouble. One key way is for the investor to make the disclosures that are appropriate for each transaction.

As I've said before, every transaction is different and every one has a different level of risk tolerance on this stuff. If you make sure to think about what should be disclosed in each transaction you'll go a long way toward covering your legal/financial hind end.

Go forth and deal!

Mike P. :blink:

#9 Guest_Bev_*

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Posted 18 December 2003 - 12:29 PM

As a Mortgage Professional I hear horror stories of Do On Sale clauses all the time

Mike Pine,

Very interesting and would love to chat with you live if at all possible about this issue if you don't mind, I don't have ICQ but you can always contact me through Yahoo msgr, at ca_property_locator or gimme yours and I'll contact you when is convenient to you.
Or just live me a msg at http://profiles.yaho...roperty_locator and I will contact you ASAP!

Please pass this to Mike for me if you see him guys.... (muak)

Thanks,

Bev

#10 mpine

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Posted 18 December 2003 - 01:04 PM

Bev,

Mine is at the bottom of every post I have. Look where it says Y! and you can msg me. I added you to my list, you show up as not being online however.

I look foward to speaking with you,

Mike
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Michael Pine
Office: (516) 874-3948




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#11 Guest_Bev_*

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Posted 18 December 2003 - 01:57 PM

Mike,

I'm online now!!!

#12 pinkerton

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Posted 23 December 2003 - 03:00 PM

Easy now, Bev...I don't think Mr. Pine has any Italian food recipies...

Mike P. :)

#13 Guest_Bev_*

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Posted 24 December 2003 - 09:54 AM

Easy now, Bev...I don't think Mr. Pine has any Italian food recipies...

Mike P. :)

Pinkerton,

I wish you a safe and unforgettable Christmas ;)

Merry Christmas to you all !

Love & Peace




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