A full-page advertisement in the March 13 editions of The Seattle Times and Seattle Post-Intelligencer contained an 18-inch photo of Donald Trump and a proclamation, in type large enough to read from across the room, that people attending Trump University could learn how to take advantage of the soaring rate of home foreclosures in order to “BUY LOW, SELL HIGH, WALK AWAY RICH.” I spent years getting a bachelor’s degree from the University of Washington and a law degree from UCLA, and neither of these universities made any concrete promises about how students could profit from the diplomas they issue.
Clearly, Trump University was advertising for something different, so I called 1-888-TRUMP-04 and a polite operator answered and asked me for my name, address, telephone number and email. Then, after a brief pause, she congratulated me on being admitted to the orientation session for Trump University that was scheduled for the next Saturday at a hotel near the airport.
I did not mention my real reason for enrolling: My recent experiences as an attorney representing victims of mortgage rescue scams made me interested to see whether Trump was helping people learn how to legitimately buy properties at foreclosure sales or teaching people the tricks I have seen used to swindle distressed homeowners.
A recent case that my colleague, Julia Kellison, and I took to trial in King County Superior Court illustrates why my curiosity was piqued by Trump’s promises. Our client, a young single mother of preschool girls, got behind on her $50,000 mortgage. Her small home was not in the best of condition, but because of its location in a nice part of Seattle it was worth more than $300,000. Accordingly, it caught the attention of people who watch for the filing of foreclosure notices.
People who bid on foreclosed properties at the courthouse steps are not the problem. Competitive bidding at foreclosure sales can help both homeowners and lenders. In fact, if our client’s house had gone to foreclosure, there would have been (according to the deed of trust expert who testified at trial) competitive bidding that would have pushed the price to more than $250,000. As a result, the bank would have been paid in full and our client would have retained more than $200,000 of her equity.
In addition, the filing of a foreclosure notice does not necessarily mean that there will be a foreclosure auction. After the filing of the notice, the homeowner has 90 days in which he or she can hire a real estate agent to sell his or her home. Alternatively, in this window of time, homeowners can try to figure out a way to cure the defaults.
For example, a HUD-certified mortgage counselor, such as those at Solid Ground (who can be reached at 866-297-4300), can frequently help homeowners work out repayment arrangements with lenders. Moreover, in appropriate cases, an attorney can help a homeowner cure a default through a Chapter 13 bankruptcy plan.
Unfortunately, because polite and articulate men bearing false promises were able to gain the trust of the Seattle homeowner, our client did not initially meet with people who would have worked in her best interests nor did she benefit from the laws that would have protected her if the foreclosure had taken place. In short, the scam artists convinced her that they worked for a company that was affiliated with non-profit organizations and that they could help her and her daughters stay in their home.
The proposed plan to save the house included job training for the homeowner, a new computer, $5,000 of “seed money” and a workable car. With these tools, the homeowner was told that within a year she would be able to get a new job so that she could afford a new mortgage that would be used to buy back her home from her “rescuers,” who said that they were taking title only so that they could stop the foreclosure.
Some of what the “rescuers” said was true. They bought her a used Ford SUV, gave her a new laptop computer and stopped the foreclosure. However, they never trained her for a new job, did not give her $5,000 and did not help her keep her home. Rather, they sold the house to an investor, who proceeded to evict her after her “option” to buy back the home allegedly expired. Instead of the $200,000 or more she would have received after a foreclosure sale, she received a used car and a laptop.
Eventually, she contacted Northwest Justice Project and, though she was unable to regain title to her home, we did get her significant cash settlements from some defendants and judgments against the others. While she was compensated for her damages, the legal process was taxing on her and she would have had tens of thousands of dollars of attorneys’ fees if she did not qualify for lawyers who do not charge a fee.
When I deposed the scam artists, they asserted that they were doing a good thing by helping the homeowner avoid foreclosure. They did not recognize that their proposed cure was worse than the disease. As it turned out, the same mentality permeated the Trump orientation I attended on March 22.
The Trump University instructor was a well-dressed, well-spoken, 40-ish man who had a good understanding of real estate transactions in general and of the foreclosure process in particular. He reminded me of the stereotypical self-help speakers seen on television, and throughout his lecture he repeated how fulfilling it is to help others, especially those facing the foreclosure of their homes.
When he described an example similar to my case, he said there was a “win-win” situation for the homeowner and for the person buying the home. On the one hand, he said, the homeowner can avoid the stigma of foreclosure and perhaps even pocket some money or other consideration, and on the other hand the buyer can acquire property at less than its fair market value. However, his reasoning is faulty. There is, in fact, a loser — a homeowner who signs away $200,000 of equity for a used car and a laptop for instance.
If someone makes you miss a bus, you may “win” by getting to keep the bus fare, but you lose bigger if it takes you two hours to walk home. Maybe the Seattle homeowner received some small benefits from avoiding the foreclosure, but the loss of $200,000 of equity in her home cannot be considered a “win.”
Likewise, I think the instructor for Trump University is deluding his students, and possibly himself, if he thinks a person should feel good about stripping the equity from a homeowner in distress. A real estate agent (for a commission of 6%) or a Chapter 13 bankruptcy attorney (charging a fee of about $1,500) would provide the homeowner with a much greater benefit. Moreover, even though real estate agents and attorneys do not walk away rich from one relatively small real estate transaction, they can use their skills to make a fair living.
At the conclusion of the orientation, I was given the option — along with the other 50 students in attendance — to enroll for three full days of intense training at a cost of $1,495. I am sure that I would learn something at the in-depth training, but I decided to save the money. Instead, I went online and purchased a good looking t-shirt, with the Trump University shield on the front, because my U.W. Husky and UCLA Bruin t-shirts are wearing thin.
Fred Corbit is an attorney in the Seattle office of the Northwest Justice Project. He recently served on the Governor’s Task Force for Homeowner Security and is a past president of the Creditor-Debtor Section of the Washington State Bar Association. At NJP he represents consumers who cannot afford a private lawyer. Corbit’s opinions are his own. He can be reached at FredC@nwjustice.org.
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