Desperate homeowners are being swindled, lawmakers say
By The Associated Press

MADISON, Wis. — Some Wisconsin homeowners desperate to keep their houses have fallen prey to scam artists who falsely promise to help them avoid foreclosure, lawmakers said Tuesday.

The salesmen use deceptive practices to convince homeowners to transfer ownership of their properties, which they refinance and sell for a profit, lawmakers and victims’ advocates said. They testified during a public hearing in favor of a bill would create new regulations governing so-called foreclosure rescues.
Typically, those transactions involve a homeowner facing foreclosure transferring the property to an investor in exchange for assurances he can continue to live there under a rent-to-own agreement. The investor pays off the amount owed in foreclosure.

While such agreements can work when done honestly, witnesses said some homeowners do not realize they are giving up their property and equity. Many end up getting evicted anyway because their new rent is much higher than their previous mortgage.

The scam artists learn their tricks at classes on “making millions from foreclosures,” witnesses said. They then scour public records for foreclosure actions and bombard homeowners with phone calls, mailings and even personal visits in which they promise help.

“These people are a cancer on the financial and real estate sector,” said the bill’s sponsor, Sen. Jim Sullivan, D-Wauwatosa.

Witnesses said they have seen the schemes statewide in the past two years as the number of foreclosures has increased. The problem is particularly pronounced in Milwaukee County, which has seen more than 4,000 foreclosure actions this year.

In written testimony, Louise Kirk said she faced foreclosure on her Milwaukee home after her husband had open heart surgery and lung cancer.

She responded to a flier from a woman who promised help selling the home. The woman insisted she be granted power of attorney and Kirk agreed. The woman then sold the house without telling Kirk and made tens of thousands of dollars in profit, said Kirk, whose husband died around the same time.

“My nerves were shattered with the death of my husband, but the fact that there was money taken from me, took me over the edge,” Kirk wrote.

Backed by the Legal Aid Society of Milwaukee, Kirk sued the woman last month in Milwaukee County Circuit Court for fraud.

Legal Aid Society lawyer Catherine Doyle said another one of her clients agreed to a transaction in which she would rent her home from an investor for one year and then buy it. She still could not afford the home after one year because of high fees and rent charged by the investor, who sold it at a $50,000 profit.

“She got nothing,” Doyle said. Of her clients, she said: “When they find out how much money these people have taken from them, it is a devastating moment.”

Doyle said the bill should stop most of the worst practices.

It would require all such transactions to be made in written contracts, which homeowners would be able to back out of within five days of signing.

The investor also would have to verify that the homeowner could afford the transaction’s fees. If homeowners are evicted, investors would have to pay them at least 82 percent of their home’s market value.

The bill also allows victims to sue for fraud and requires courts to put evictions on hold for at least 90 days if homeowners file suit.

A Senate committee that oversees the financial industry is expected to vote on the plan in coming weeks. With bipartisan support and backing from financial companies, it appears likely to pass. Several states, including Minnesota and Illinois, have similar laws.

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