Bulletin: MU2008004

Dear Associates:

Please be very wary of the ongoing practice of foreclosure rescue transactions because they could be equity skimming fraudulent transactions. We are having an inordinate number of calls regarding transactions that, on their face, looks like a "way out" of a foreclosure crisis for distressed homeowners. In reality, the "quick fix" rescue schemes are causing more problems than they fix.

There are as many variations of the foreclosure rescue schemes, as there are desperate homeowners. There are some well-intentioned organizations and the individuals involved are helping people in foreclosure situations. However, it is difficult to tell which of these schemes are insurable. We are asking all agents to be extremely cautious and to contact the company before closing any transaction in which there is a foreclosure filed; where you are aware of a default situation or there is a short pay off of a prior mortgage.

The Red Flags of the foreclosure rescue scenario:

1. Mortgage is in default or foreclosure
   
2. The sellers remain in possession of the property
   
3. The property is transferred into a Land Trustor third party
   
4. The seller is the initial beneficiary of the trust/purchaser
   
5. The beneficial interest is then flipped to a third partyusually as payment for the "rescue"
   
6. "Short sales" are suspect and require further inquiryinto surrounding facts
   
7. There is an unrecorded agreement to re-conveythe property at a later date
   
8. The mortgage is not being paid off
   
9. The sale/leaseback of residential property
   
10. "Equity Participation" transactions
    
11. Excess fees on the HUD to third parties

Any transaction wherein one or more of the above red flags existmay not be insured without the written approval of a Stewart Underwriter. Please refer these transactions to state underwriting counsel for analysis and approval.

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