Rob McKenna sucks up to foreclosure rescue scammers

He may not be much of a lawyer, but Attorney General Rob McKenna has a well-earned reputation as one of our state’s most talented politicians… if by “talented politician” you mean a shameless suck up. Rob’s just a guy who can’t say “no” to potential constituencies… you know, the kinda guy who might actually thank you for suing his client, as long as such blatantly inappropriate brown-nosing served his long term political aspirations.

Our AG’s unrivaled talent at political bootlicking was on display once again in a recent article in the Seattle Weekly, in which McKenna—a self-proclaimed crusader against consumer fraud—bizarrely comes out on the wrong side of mortgage foreclosure rescue scams in a seemingly unselfconscious effort to curry favor with the well-heeled Washington Association of Realtors.

McKenna has been less enthusiastic about that foreclosure measure as the state’s realtors have stepped up their criticism of it. The Washington Association of Realtors recently posted a video on its Web site decrying the measure and talking about plans to get it changed. The video features McKenna. In it, he says the foreclosure bill that passed “was far different than what I originally proposed. The state Senate added in a lot of language that we never intended and that we actively opposed with our friends in the realtor community.”

Oh really? Here’s a clip from the Realtor’s video, so you can see McKenna making the case in his own words:

So McKenna and his “friends in the realtor community” actively opposed the Senate amendment, but those sneaky Democrats still managed to ruin his bill? Through a spokesperson McKenna goes on to claim:

But Kristin Alexander, spokesperson for the AG’s office, claims the amendments were dropped into the bill only hours before the legislature passed it. “We had literally moments in which to review the legislation,” she says. She points to the bill’s history as proof: In February and March, the bill morphed through several drafts before the House and Senate agreed on a final version—only a day before it was delivered to Gregoire.

“The [consultant] language was in, and then it was passed and we never had time to react,” Riley says. “If we had known it was in there, we would have pitched a fit, we would have gone to huge lengths to eliminate it. But we didn’t know.”

Uh-huh.

In fact, as the Weekly fails to point out to its readers, the bill’s history actually proves the opposite: the amendment received a public hearing before the Senate Consumer Protection & Housing Committee on February 29, six days before its initial passage in the Senate, and a full twelve days before its unanimous passage in the House. As anybody who knows the workings of Olympia will tell you, that’s an eternity during a legislative session; indeed, far from having no time to react, the Senate bill report clearly shows that Jim Sugarman of the AG’s office not only didn’t utter a word in opposition to the amendment, he testified in favor of the bill, and that nobody from the “realtor community” opposed the bill on the grounds that are now at the heart of the dispute.

So what is it about this bill that has McKenna and the realtor’s undies in a knot? The “distressed property” bill was intended to address an increasingly common scam, in which homeowners facing imminent foreclosure are convinced to sell their houses for nothing, in exchange for a fraudulent promise to let them stay in their homes, and eventually buy the title back. As McKenna suggests, the original House bill, as introduced by Rep. Pat Lantz, was narrowly focused, only sanctioning those parties who fraudulently receive title of these distressed properties. But in reality, many of these scams are facilitated by shady realtors who do not receive title themselves, but are compensated by the crooks who do.

The provision to which McKenna and the realtors now suddenly object—a provision that Rep. Lantz testified made her bill “even better,” and that passed both the House and the Senate by near unanimous margins—merely extends liability to licensed realtors, mandating that they have a fiduciary responsibility to represent the interests of the homeowners, while providing full disclosure of the terms of the agreement. Seems pretty commonsense to me, kinda like requiring ice cream vendors to sell you, you know… ice cream. So the problem is…?

Realtors now claim that this measure would open them up to frivolous lawsuits, a complaint that A) is facially ridiculous; and B) was never raised while the measure was being considered.

As for A), anybody could sue anybody for anything; for example, McKenna could sue me for libelously implying that he’s in cahoots with foreclosure rescue scammers. He wouldn’t win, but he could sue me, and he could cost me an awful lot of time and a pretty penny in the process. But that hasn’t stopped the realtors from playing victim here:

Riley wants to get realtors exempted from the fiduciary duty, as mortgage brokers and nonprofit counseling agencies are, under the law. He says realtors are vulnerable in that if a buyer gets a very good deal on a home, and if later the seller decides the deal was too good, the seller could sue. “What’s happened as a result is that some of our members have elected not to help these people, and let the homes go to foreclosure, because they think it’s safer to do that because of the increased liability,” says Riley.

Such a scenario is not implausible, says Melissa Huelsman, a Seattle-based consumer-advocacy attorney who was involved in crafting the law. However, “they’re, in my opinion, stretching it in a way that no rational judge would ever view it. This law in no way, shape, or form was directed at those kinds of transactions.” No one contacted for this story had heard of a lawsuit yet being filed under the law.

[State Sen. Brian] Weinstein agrees. He says the new law would only impose liability on a realtor who did not put the homeowner’s best interest first, or who failed to comply with the disclosures required in the bill, causing economic harm to the homeowner as a result of the transaction.

I’ve spoken with both Huelsman and Weinstein, and neither would object to inserting language specifying that this provision is not meant to extend liability to such frivolous circumstances… but then, neither think it necessary. And both assure me that this concern had never been raised during the lengthy discussions between realtors, consumer advocates, the AG’s office and legislators during the months that led up to final passage.

In fact, contrary to McKenna’s claim that he “actively opposed” this measure at the time, Huelsman tells me that she never heard a single objection on such grounds until two months after the bill’s final passage.

So what accounts for McKenna’s sudden change of heart (and history)? If he really believes there’s a liability issue here, his office certainly didn’t catch it at the time, so perhaps he’s just trying to cover for his own screw up? Or maybe he once again got caught up in the moment, telling the realtors what they wanted hear, the record be damned, as he often does when speaking to special interest groups?

But whatever his motives the tactics seem clear: a calculated effort to strong arm the legislature into striking a necessary and reasonable consumer protection provision… an effort that ultimately benefits nobody but the handful of crooked real estate agents who are cruelly scamming WA families out of their homes. And an effort on whose behalf he’s even willing to allow himself to be caught in a lie.

Somehow, you’d think we might expect more from an AG who has made fighting consumer fraud a centerpiece of his reelection campaign.

UPDATE:
The fucking cowards at the Washington Association of Realtors had YouTube pull my clip, which was without a doubt fair use. (Why do they hate America?) No bother, I’ll just post it again using another a service.

Comments

  1. 2

    ivan spews:

    Good job, Goldy. This is the kind of crap McKenna has been pulling all along. It would be nice not to have an Attorney General who is for sale to the highest bidder.

  2. 3

    Proud To Be An Ass spews:

    Goldy,

    In the absence of the (very sound indeed) amendments our esteemed A.G. objects too, would not conspiracy statutes apply?

    Also: Residential real estate is a classic example of a market with imperfect information. Show me a sharp & agressive realtor who doesn’t come across sellers (especially the elderly) who don’t have a clue as to the current market value of their property, and I’ll show you a realtor who is stealing the money somewhere else (disclaimer: most realtors are honest, hard working….etc. but not especially sharp or aggressive).

    Ever see those ads “cash for real estate”? They’re basically people trying to buy property way under market, i.e., steal it.

    These foreclosure “protection” offers are in the long and honorable tradition of property bamboozeling that helped make this country what it is fostering as it does the widespread idea that you can indeed get something for nothing. But since we’ve run out of land to steal from the Indians, these scams demonstrate that old habits do indeed die hard.

  3. 4

    Mark1 spews:

    Shitty lawyers? Sounds like Goldy and Roger Rodent (if in fact he even ever was a lawyer.) Hypocrisy at it’s finest!

  4. 5

    proud leftist spews:

    McKenna is not worthy of his position, having no material experience as a lawyer. He also could give a rat’s ass about the little guy. John Ladenburg, on the other hand, has mounds of experience as both a lawyer and an executive. Moreover, he actually understands that the Attorney General is charged with protecting this state’s consumers. The choice could not be more clear.

  5. 6

    Roger Rabbit spews:

    Seattle Weekly? Isn’t that a conservative magazine published by Texas Republicans?

  6. 7

    Roger Rabbit spews:

    Shady realtors? No! You don’t say! Who would ever think a realtor would do anything shady?

    Say, didn’t Dino Rossi’s boss go to prison for defrauding widows and orphans?

    Makes me wonder if a “Gov. Rossi” would ever sign any consumer protection bill emerging from a Democratic-controlled legislature — or would he be more likely to undermine every consumer protection law already on the books?

  7. 8

    Roger Rabbit spews:

    @2 We had one of those for 12 years. The good news is she got promoted. The bad news is we need her in both places at the same time, which isn’t possible.

  8. 9

    Roger Rabbit spews:

    @2 We had one of those for 12 years. The good news is she got promoted. The bad news is we need her in both places at the same time, which isn’t possible.

  9. 10

    Roger Rabbit spews:

    @4 What gives you the idea Goldy was ever a lawyer? Are you confusing Goldy with ex-lawyer Crackpiper? As for whether I’m a lawyer, I don’t give a shit what you think. That’s between me and the dues collection department of the bar association.

  10. 11

    Kary L. Krismer spews:

    Goldy, you obviously are not a lawyer. The goals of this legislation are good, but the implementation was poor. A simple reading of the statute clearly demonstrates that.

    The worst of it is you can have a buyer make an offer on a listed property, and if the sale happens to be within 20 days of a foreclosure, the buyer is deemed to be a fiduciary of the seller, and must put the seller’s interests ahead of their own. And if they didn’t, then they can be sued for treble damages, and attorney fees. Why would a buyer take such a risk? They wouldn’t, and the seller will end up being foreclosed instead of selling their property.

    There are also other problems. If someone owns a condo unit, and there are over four units in the building, they are not covered. But an investor owning a four-plex could be if they lived in one of the units. And the person selling their old house after buying a new house, they receive little if any protection.

    Also, the definitions of “distressed home conveyance” and “distressed home purchaser” are circular, so you can’t determine what either means.

    The goals of this law are good, but the amendments were poorly drafted apparently by amateurs. And the effects of those mistakes are hurting the people the bill was designed to protect.

  11. 12

    All Facts Support My Positions spews:

    Kary is right. This legislation is truly pathetic. Were they all fuc*ing drunk when they voted on this?

    How is a buyer, or their agent supposed to look out for the best interest of a distressed seller? The buyer’s agent represents the buyer. This is AMERICA!

    The law is extremely vague, (and probably unconstitutional) and invites lawsuits like nothing I have ever seen. Even though there are some sleazy dishonest investors, most “I Buy Houses” types truly help people limit damage to their credit, or get something from a house that is going to auction, while making a profit. What is wrong with that?

    It’s not like investors made these idiots buy houses they can’t afford, or get loans they could never pay off, unless their house appreciated 10% a year forever.

    It appears the intent of this disgraceful law was to make sure investors avoided people facing foreclosure, so every single house gets foreclosed on, and sold at auction. Every single person gets their credit destroyed by having a foreclosure on it. Wahoo!!!! Right legislators?

    What the hell were these idiots in Olympia thinking?

    If I was the governator, I would call these idiots back to session, like yesterday, and fix this abortion. This law will help ZERO HOMEOWNERS!!!!!!!!

    What the fu*k were they thinking…..

    I would also lay off the Realtors. The Realtors
    Association in this state does a great job policing it’s members. I mean it. If you don’t believe me, make a few phone calls to Florida and ask about their slimy Realtors (and lenders).

  12. 13

    Tom Foss spews:

    As to those at 11 and 12, let me suggest you need to read the bill again and take some remedial classes in basic law and definitions. Anyone of these realtors can make basic disclosures to the distressed seller and then act as they please. If you don’t make basic disclosures, and then take actions that hurt the interest of the distressed homeowner, and they can prove it, you are potentially liable. No one else is affected.

    As to the idea that we have strong protections against predatory realtors, please, don’t insult my intelligence. I don’t know if we are better than Florida or not, but we have way to many layers of protections in real estate law for brokers and agents now since our recent rewrites of the law, while we screw the buyers. Since the industry re-wrote the law to their own satisfaction several years ago, no real protections exist. Show me one real case of accountability for lies told since then? I will tell you I can show you several cases of gross misreps where no accountability exists now.

    Realtors seem to not like the fact that this law will require full disclosures, and also keep the few among them who are preying on distressed sellers and taking chunks of remaining equity from them, or even whole houses, from doing so with virtual immunity. Thats the simple truth.

    BTW, how is this unconstitutional? Only Scalia could come up with that kind of twisted and pathetic thought.

    We need an AG who stands for the people, not the swindlers. BTW, what did McKenna do to try and head off or attack the biggest swindle in modern western civilization? Uuuhhh, nothing.

    -Tom

  13. 14

    All Facts Support My Positions spews:

    How is offering to buy someone’s house swindling them Tom?

    They need to sell their house, and you buy it at a price you can resell it for later at a profit. Since you didn’t pay RETAIL for the house, and you sold it for a profit because you had the time and resources to wait, they can still sue you because you didn’t give them RETAIL $$$ for the home. Even if you are completely honest, as is almost every single real estate agent I have ever done business with, you can still be wide open to a lawsuit, because you “didn’t act in the distressed home seller’s best interest” or other drivel. Requiring a buyer’s agent to “look out for the best interest of the seller” with “a fiduciary responsibility” is insanity, and retarded. That is the job of the seller’s agent, the seller’s lawyer, the seller’s accountant, or their friend. If an agent lies to a seller, they can, and always could be sued. Now the bar is not higher, it is out of reach.

    Why should any investor attempt to buy any house in foreclosure Tom? If they offer an amount that is low enough for the investor to resell it for a profit, this vague pathetic law gives a license for the loser selling the home to sue them later.

    There are thousands of lawyers a million times as slimy as ANY Real Estate Agent I ever met willing to take the case too.

    Protecting people from lying scammers is fine. This legislation does not do that, in any way shape or form. No one forces any seller to sign any contract, and sell their home. They can always say no, try to get a better price, or just give it the bank come auction day.

    It is called a free market. Prosecute the scammers, but let commerce happen without idiotic ill defined restrictions, that will only lead to litigation.

    If the legislature wants to make some hay, why don’t they have McKenna look into all the fraudulent loans, and dishonest lenders that gave credit to people that couldn’t afford a pack of gum, much less a house. Now that would be something.

    My buddie bought a condo for 200k and he makes $5,000 a year. He got a 100% loan. Go figure….

    And the legislature wants to make investors behave like fairy god mothers? Screw that. Let the banks have the god damn houses. They appear to need a few million more REO’s!!!

  14. 15

    All Facts Support My Positions spews:

    By the way Tom, I have spent hours upon hours discussing this very bill with friends, investors, and multiple attorneys.

    There is no one this bill will help. Period.

    Their answer is just go to the auction and buy the house there. Everybody loses. It is too dangerous (even a felony) to try to help someone. Screw that. That is why we have shelters, and campgrounds! Maybe in 7 years they might be able to buy a house…..

  15. 16

    Kary L. Krismer spews:

    Tom Foss, as to 13 you are wrong. What the NWMLS did is have the seller make certain warranties that they aren’t distressed. That won’t protect anyone, but perhaps the broker above the agent.

    Take short sales for example. An agent doing a short sale will need to contact the bank, but that act along will make them a distressed home consultant (assuming the foreclosure issues are present). That’s just plain wrong.

    And I’d suggest you read the bill again, and then come back and try to contest any of my claims of what the bill does. 5 unit condo–not covered. Old house being sold after buying new house–probably not covered (I can make an argument it is while in foreclosure). As to buyers, a “distressed home consultant” the definition includes any person that represents to the “distressed homeowner” that they will “Purchase . . . the distressed homeowner’s residence within twenty days of an advertised or docketed foreclosure sale.” Given the time it takes the typical transaction to close, that would catch just about any buyer who made within two months of a foreclosure.

  16. 17

    Kary L. Krismer spews:

    I’ll through this out there–it’s not my idea–but I can’t say it’s wrong. Maybe someone else can see the error in the thinking.

    I was a bankruptcy attorney for 20 years, primarily representing debtors and Chapter 7 trustees. If someone came in to see me, and they were in foreclosure there were typically two options. Chapter 7 or Chapter 13. Chapter 7 typically would not help a foreclosure situation, but might allow the debtor to reside in the house a few more months because it would delay the foreclosure. Chapter 13 could help, but if the debtor couldn’t afford the loan payments plus 1/36th of the delinquency, the court would typically only allow them 6 months to sell.

    So let’s assume a hypothetical potential client comes in. Their mortgage “adjusted” and they cannot refinance. They can’t make even the regular payments and they have less than 10% equity in their home after accounting for the delinquency. They have little/no other debt, and could get by just fine if they could rent an apartment. A “scammer” recently offered them $5,000 to walk away.

    Prior to this legislation, I would have told them to take the $5,000 and run. That would avoid the foreclosure, and the need for a bankruptcy. The only concern would be that the transaction was handled properly, such that the “scammer” would actually pay off the existing mortgages as part of the transaction.

    After this legislation, the “scammer” probably won’t be there to make the offer. So rather than get $5,000, the owner will get a foreclosure on their record. And if their loan was an 80/20 package, they’ll probably be looking at a bankruptcy to discharge the second.

    So before the legislation, $5,000 in the owner’s pocket. After the legislation, $0.00 and a foreclosure and possible bankruptcy. How is this better?

    Basically the argument I heard was that this legislation is “nanny” legislation that takes away what very well might be a rational and informed person’s best choice. I haven’t come up with a way to counter that argument.

  17. 18

    thor spews:

    The Association of Realtors may do a good job on many things in this state, and the law obviously needs fixing, but it still doesn’t appear that Rob McKenna was “actively opposed” or very effective on an important topic.

    The Realtors also often play a poor form of gutter politics and appear to be pulling out all sorts of stunts to try to help Dino Rossi. Some of it is way over the top garbage.

  18. 19

    Kary L. Krismer spews:

    thor, I don’t think either McKenna or the Realtors opposed the changes. Part of that is because the changes were so poorly drafted you needed to read them about 10 times just to have a basic understanding of how they didn’t work! And in addition, everyone was focused on the scammers. No one realized that the law had broader implications. What it did to the scammers was arguably a good thing (subject only to my argument in #17).

    If I were to blame anyone, it would be the legislature. They have staff attorneys on hand who are supposed to review legislation. Things like the circular definition should have been caught, and that should have raised other issues.

    Also, the material that was added really was much bigger than the original bill. It should have gone through the entire legislative process on its own, rather than being added at the last minute. If that had happened, I have little doubt that changes would have been made to it, and it would have been a good bill at that point.

  19. 20

    All Facts Support My Positions spews:

    Governor Gregoire. Call them back into session, and repeal this nightmare. It will serve them right to have to fix a problem they, and you (by signing it) caused. So what if they can’t fundraise for a day or two. There are thousands of people (Washingtonians) adversely affected by this sloppy attempt at stopping equity scimmers.

  20. 21

    Kary L. Krismer spews:

    “All Facts” is right. People are being hurt by this. A special session would be appropriate, but a special session apparently isn’t going to happen.

    There’s some hope something can be rushed through at the beginning of the new session to fix the problems. If it can’t be, they really need to rush through a repeal and then take the time to do it right this time.

  21. 22

    Tom Foss spews:

    Gee, “always right” and “facts are all with me,” or whatever, I have been busy working the last 24 hours, and just saw this, and I guess I hit a sore subject. I re-read the bill, and bill history, and current law. And I firmly believe you are mistaken.

    All I can see in these responses to my comments is a red herring. Its like me saying, “gee, I could get sued because I am representing my client, and someone might sue me for that,” so I won’t represent anyone. Its also like saying, “if I drive my car, I might hit someone and get sued, so I won’t drive.” That is your logic.

    Under the bill, if you give full disclosure of your activities, and don’t hurt the client’s interest, you have no worries.You can do any transaction in the short sell category, and have no risk. But if you are screwing the owner, and putting them in a knowingly untenable position where you will be taking their house, and did not fully disclose the pertinent considerations, you may get sued. Apparently, it escapes your consideration that realtors have been part of the problem in this whole area that is not that serious, it only threatens and has put at risk our western civilization and economic system. And yes, banks are a huge part of the problem, but that is a Federal issue. I agree we need to address that, but its preempted and outside the purview of the legislature. Gee, its hard for realtors to have to responsible I guess. But life is tough.

    As for our AG, why did he support this bill, celebrate its passage, let this version ride for four weeks with no comment or complaint, and now turn against it? Election year?

    -Tom

  22. 23

    All Facts Support My Positions spews:

    Tom I realize that the point of this article was to point out McKenna talking out of both sides of his mouth. After hearing him speak at our REAPS meeting, one of my attorneys asked me if I believed what he said. I replied “Since McKenna is a Republican, the best he could do is only be lying 50%” or something. It turns out he may have been lying more than 50%, when it comes to how the bill was introduced, and moved through the legislature, and what part he (his office) played in it’s final version. We will see.

    I realize anyone can sue anyone at any time for anything. You are right. This law is just so vague that one could safely assume making a profit from a house you buy from someone in foreclosure, may in itself be acting in your best interest and not the distressed seller’s. I have had a few deals that I walked away from. They were complicated, but would have helped homeowners get rid of their houses they couldn’t make payments on, but the risk of getting sued for helping them was (now) too great.

    You may not know this, but there is a cadre of lawyers in this state trying to find people like me to sue, just for HONESTLY helping people, and making a profit at the same time. I am talking about an organized group that make money suing investors, whether they did anything wrong or not. They consider any deal I made money on “damages”, whether I was completely honest or not with the (if they are ignorant then automatically I did wrong) home owner. This law just helps them fill their bank accounts with my hard earned cash, whether I was honest or not.

    If you are in foreclosure, or even according to the law told someone you may someday be in foreclosure (sic) you can just plan on getting zero help from us (investors) right. Call Bush’s foreclosure hotline and see how much help they are!!!

  23. 24

    Kary L. Krismer spews:

    Tom, you’re ignoring a lot.

    First, disclosure does nothing under the law. It you perform certain acts (e.g. contact the bank) you are a distressed home consultant.

    Second, if you are a distressed home consultant, then you open yourself up to more than just a suit for damages. You open yourself up to a suit for treble damages (up to $100,000) and attorney fees. That’s a litigation magnet, that will attract attorneys to you like flies.

    Third, the new NWMLS forms do nothing to protect the agent. They’re designed to protect brokers by allowing the broker to claim he/she didn’t know the agent was dealing with a distressed property. That will possibly leave the agent defending the lawsuit on their own.

    Finally, The Weekly has a good article on the history of the bill.

    http://www.seattleweekly.com/2.....-his-bills

  24. 25

    Kary L. Krismer spews:

    Pursuant to RCW 61.34.020(3)(ix) anyone who offers to purchase a home within 20 days of foreclosure is a “Distressed Home Consultant.” Pursuant to Sec. 3 of the new act, a “Distressed Home Consultant” must “act in the distressed homeowner’s best interest . . ., and not compromise a distressed homewoner’s right or interest in favor of another’s right or interest, including a right or interest of the distressed home consultant.”

    Thus, innocent buyer looks at a house with their agent. They make an offer with a closing date within 20 days of a foreclosure, thus becoming a distressed home consultant. The inspection then comes back indicating that there is $20,000 worth of damages to the house. They back out of the deal, and the house is foreclosed, costing the homeowner $50,000 of damages. The buyer then gets served with a suit, suing them for $150,000 ($50,000 plus $100,000 treble damages) and attorney fees. The suit claims that the buyer did not put the seller’s interests ahead of their own.

    This is the reason for the new NWMLS Form 22 NFW. Personally I don’t think the form goes far enough, so I use a customized form, making the offer void, not merely voidable. But either way, being in foreclosure is the kiss of death for a listing, unless you get a naive agent and/or naive buyer.

  25. 26

    michael spews:

    I’m not real good with Realtor stuff or legal stuff, but it seem to me that our AG is saying he doesn’t have to enforce the law because the Leg. passed a law he didn’t like.

    Have I got that about right?

  26. 27

    Kary L. Krismer spews:

    The AG wouldn’t enforce this law. It’s up to individuals to sue if they’ve been harmed.

    What the AG is saying is the material added shortly prior to enactment is not good legislation. That he proposed some good legislation and material added to it is bad legislation. He’s right. It’s poorly drafted and has a lot of unintended consequences, such as making it harder for people in foreclosure to sell their homes, and making it harder for people in financial trouble to get good agents to represent them.

  27. 29

    km spews:

    Not sure why you’re making such a fuss, but I know of an example to contradicts your accusation. McKenna did not respond to a questionnaire and request for an interview by WEA’s political action arm. When I inquired of him why he passed them over without a comment, he said it would be a conflict of interest for him to seek the endorsement of someone he’s opposing in court. Not the sound of a suck up to me.