Other LanguagesAG Ferguson prevented company from illegally taking funds from customers
OLYMPIA — Attorney General Bob Ferguson today announced that, as a result of his lawsuit, Kirkland- and Portland-based Real Estate Investment Network, LLC (REIN) will be required to dissolve and pay up to $85,000 for scamming foreclosed homeowners out of equity in the form of surplus funds remaining after the sale. These surplus funds can amount to tens of thousands of dollars.
In the consent decree filed today, REIN is legally required to stop its deceptive scheme. The key players in REIN's scheme are prohibited from engaging in similar conduct in the future. REIN is also required to pay $50,000 in attorneys’ costs and fees and $35,000 in penalties, $27,500 of which is suspended as long as the company does not violate the terms of the consent decree.
In the course of its scheme, REIN approached 35 consumers. It signed contracts with 16 of those consumers. Ferguson sought and received an injunction before REIN could collect on its unlawful contracts. On May 30, 2018, a judge ordered the company to halt its deceptive practices while the state’s lawsuit progressed. This blocked the company from collecting surplus funds from Washington homeowners.
“This company preyed on people facing foreclosure,” Ferguson said. “Foreclosure is stressful enough without scammers taking money rightfully owed to homeowners. My office will continue to be a watchdog for these consumers.”
In May 2018, Ferguson filed a lawsuit in King County Superior Court against REIN, asserting it charged excessive fees, often more than 50 percent of the surplus funds homeowners are entitled to following the foreclosure of their home, much more than the 5 percent allowed under Washington law. Kerry Hemmingsen, Daniel Stack and William Gastineau, who all played key roles in REIN’s scheme, are also named as defendants in the case.
All costs and fees will go toward further enforcement of the Consumer Protection Act.
With the real estate market booming, more and more foreclosure sales bring in more money than is owed on the mortgage. These additional funds are called surplus funds.
Any surplus funds are deposited with the county superior court. Homeowners can recover the surplus funds through a relatively simple process that most consumers can handle themselves or with minimal assistance from an attorney.
REIN approached foreclosed homeowners soon after the foreclosure sale, before they received notice that surplus funds are available. REIN told consumers that surplus funds may be available, but that action must be taken quickly or they may not be able to recover them at all.
According to the lawsuit, the company violated the Consumer Protection Act when it deceived homeowners with a high-pressure sales pitch that created a false sense of urgency and misrepresented the process for recovering surplus funds. REIN’s sales tactics included repeated calls and visits to the homeowner, talking to neighbors, and in at least one instance, approaching the nine-year-old child of a foreclosed homeowner as she got off the school bus.
In one example, REIN told a Buckley farmer his family was entitled to $44,000 from the foreclosure sale of their parent’s home. The company didn’t tell him that the sale made more than $134,000 in surplus funds. “We were getting scammed,” he told a KING 5 reporter.
Under the consent decree, the defendants, including the key players in REIN’s scheme, are required to:
- Dissolve REIN
- Amend any previous contracts with consumers that violate the law
- Ensure any contracts with consumers charge no more than 5 percent of surplus funds
- Stop misleading consumers about the amount of surplus funds available or the process to obtain surplus funds
- Stop any other acts or practices that violate the Consumer Protection Act
The defendants are also required to pay:
- $50,000 in attorney’s costs and fees
- $35,000 in civil penalties, $27,500 of which is suspended as long as the defendants follow the terms of the consent decree
If you are struggling with your mortgage or facing foreclosure, the Attorney General’s website lists resources you can trust and tips on how to avoid foreclosure scams. Consumers who signed an agreement related to surplus funds from foreclosure are encouraged to both file a consumer complaint with the Attorney General’s Office and contact Northwest Justice Project.
Assistant Attorneys General Heidi Anderson and Mina Shahin handled the case.
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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.
Contacts:
Brionna Aho, Communications Director, (360) 753-2727; Brionna.aho@atg.wa.gov