Real Estate Investment Network accused of scamming homeowners out of “surplus funds”
OLYMPIA — A King County Superior Court judge has ordered a company accused of scamming foreclosed homeowners out of equity in the form of surplus funds from the foreclosure sale to halt its deceptive practices while the state’s lawsuit progresses.
On May 18, Ferguson filed a lawsuit against Kirkland- and Portland-based Real Estate Investment Network, LLC (REIN), which had been charging up to 67 percent of surplus funds it recovers for homeowners following a foreclosure sale. These fees amounted to tens of thousands of dollars for each homeowner. Judge Catherine Moore granted an agreed order for a preliminary injunction, which, among other restrictions, prevents REIN from collecting more than the 5 percent allowed by law.
“My office is a watchdog for homeowners facing foreclosure,” Ferguson said. “I will hold companies that prey on homeowners facing foreclosure accountable.”
With the real estate market booming, foreclosure sales can bring in more money than is owed on the mortgage. Homeowners can often recover these “surplus funds” through a relatively simple process with the court.
REIN approached foreclosed homeowners soon after the foreclosure sale, before they receive notice that surplus funds are available.
REIN’ misrepresented the process for recovering surplus funds, telling consumers the process could take up to a year and will be near impossible without their help. REIN then offered to help the consumer recover the funds in exchange for a fee, but presented documentation giving REIN all the rights to the surplus funds. Although REIN returned a percentage of the recovered surplus funds to the consumer, REIN’s cut often exceeded 50 percent of the total recovery and was sometimes as high as 67 percent.
REIN omitted any information about the amount of surplus funds available, which can exceed $100,000. In one instance, the foreclosure sale led to $134,000 in surplus funds, and under the terms of its contract, REIN would recover around $90,000 for its services. In another case, REIN’s contract allowed it to recover about $88,000 of more than $141,000 in surplus funds.
One victim told KING 5 news that when he learned the true amount of the surplus funds available, he thought, “We were getting scammed. Totally.”
The order prevents REIN from:
- Making misrepresentations or material omissions to consumers about surplus funds;
- Charging homeowners more than 5 percent of recovered surplus funds plus reasonable costs not to exceed $225; and
- Failing to disclose all the information REIN knows about a consumer’s foreclosed property, including the foreclosure sale price, liens on the property and the amount of recoverable surplus funds.
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.
Brionna Aho, Communications Director, (360) 753-2727; email@example.com