Washington State

Office of the Attorney General

Attorney General

Bob Ferguson



Frequently Asked Questions

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SEATTLE - A new state law to help protect financially strapped homeowners from equity skimming and foreclosure rescue scams becomes effective in Washington on June 12. The new law provides safeguards for people trying to stop the loss of their home and requires new disclosures and responsibilities for individuals claiming to help homeowners avoid foreclosure.

House Bill 2791, based in part on legislation proposed by the Attorney General’s Office, aims to reduce foreclosure rescue schemes that promise to save homes, but all too often add insult to injury, either by stripping the equity from the property and leaving the homeowner with nothing, or by charging exorbitant fees for unnecessary or non-existent services.

The new law addresses two common types of foreclosure rescue scheme perpetrators:

  • Distressed home purchasers who lead homeowners to sign over the deed to their property by promising to sell the home back once the homeowners get back on their feet financially and allowing them to remain in the home as tenants in the meantime. The homeowners frequently do not understand the transaction, receive little, if any, financial benefit and are ultimately stripped of both their home and whatever equity they had in it.
  • Distressed home consultants who offer phantom help to homeowners in financial distress, typically with false promises to “stop the foreclosure” or “save the home.” The consulting services are often of little or no value and serve only to delay homeowners from seeking real assistance from qualified professionals such as mortgage counselors or attorneys.

Distressed Homeowner Protections

The following distressed homeowner protections apply only when a purchase agreement includes an offer for the original homeowner to lease the home and buy it back or receive a portion of proceeds of any resale:

  • Distressed home purchasers must provide homeowners with a written contract completely describing the terms of the sale and giving the homeowner a right to cancel the sale for within five days.
  • Prior to the sale, the purchaser must verify that the homeowner has the ability to make rental payments and to buy the home back.
  • If the homeowner is unable to buy the home back, he or she must receive at least 82 percent of the fair market value of the home at the time the homeowner loses possession of the home.
  • A homeowner injured by a violation of the statute may collect up to three times the amount of actual damages, not to exceed $100,000.

Distressed Home Consultant Provisions

  • Distressed home consultants must provide homeowners with a written contract listing all services and charges.
  • The consultant has what is called a “fiduciary duty” to the homeowner, meaning the consultant must act at all times in the best interests of the homeowner.
  • Because the Legislature (unlike similar statutes in other states) did not exempt licensed real estate sales persons from the law, sellers who are behind on their loans or real property taxes may be asked to sign a revised listing agreement limiting the services offered by the real estate agent or broker. Without new agreements, brokers and agents risk unanticipated liability in such cases.

Tips for Distressed Homeowners:

  • Free foreclosure and homeownership counseling is available from the State of Washington.  Contact the Washington State Homeownership Information Hotline at 1.877.894.HOME (1.877.894.4663) or visit www.homeownership.wa.gov for a list of counselors in your area.
  • Consider alternatives to foreclosure. Your lender may be able to temporarily reduce your mortgage payments or assist you with restructuring or refinancing your loan so that you can stay in your home. If you're unable to afford the house long-term, you may be able to sell before the foreclosure sale and save some of your equity.
  • Approach any unsolicited offer of assistance with caution.  Seek professional assistance, but carefully select the professionals you choose to help you.  Ask for references and check them. Check with state licensing authorities. 
  • Ignore signs, fliers and hand-written notes offering foreclosure help. Scam artists typically advertise their “services” on posters pinned to telephone poles and fliers dropped on your porch. They also contact people whose homes are listed in public foreclosure notices.
  • Read everything and don’t sign any papers you don’t understand.   Once you sign papers, insist on immediately receiving copies that you can keep of all the documents.

Frequently Asked Questions

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Media Contact: Kristin Alexander, Media Relations Manager - Seattle, 206-464-6432