A word from The Tim: This post is from another long-time Seattle Bubble participant: Jillayne Schlicke, real estate educator through her company CE Forward. Many thanks to Jillayne for writing this in-depth follow up!
The Tim asked me to write a follow up blog post about my meeting with Howard Bono, owner of The Financial Revival Group. Howard reached out and invited me to coffee so I could learn more about what’s going on in Arlington. A natural skeptic and hater of predatory loan mod scammers and predatory short sale negotiators, I was unsure what Howard was up to and wanted to find out, as long as I didn’t have to drive up to Arlington. So Howard came to me and he bought the coffee. Full disclosure: I am not affiliated with The Financial Revival Group nor do I receive any referral fees from FRG.
The elevator version of the Financial Revival Group (FRG) is as follows: For a fee, FRG will act as a counselor to help financially distressed homeowners staring down negative equity sort out their options, providing reasons for and against each option. This fee also includes a set amount of legal advice from an attorney.
The coffee version of FRG paints a more vivid picture of homeowners struggling with all the emotion and stress of financial misery, at the end of their rope and finally out of the closet of denial flailing around for some kind of hope to grasp onto beyond the conspiracy theory blogs about the coming zombie apocalypse (that is coming, btw.) But before I more accurately describe the person who would be a good match for FRG let’s make a pit stop along the u-walk-away road and visit a typical day in the life of Jillayne Schlicke, real estate/mortgage educator.
The most frequently asked question in my classroom during calendar year 2010 and now into 2011 is asked by both real estate brokers as well as loan originators. They typically wait until everyone else has left the classroom and then ask, “I have this friend who’s thinking about walking away from her mortgage.” 99 percent of the time the person who is thinking about walking away has already made up her mind and just wants someone else to tell her she’s not a bad person. (Interestingly, a certain percentage of time, the walker is the Realtor or LO but that’s another topic for a different day.) People who have already made up their mind to strategic default don’t need FRG’s help. Instead they are better off hiring direct legal counsel to make sure they fully understand all the legal consequences of what they’ve already decided to do.
So who would benefit from FRG’s services?
Some homeowners are resourceful, self-reliant and have both feet firmly on the ground when they say they’re thinking about selling short/asking for a loan mod/becoming a walker. Others, not so much. The group of homeowners who will fit well with FRG’s service proposition are the anxiety filled homeowners who need hand-holding.
There are a few good reasons why I like what Howard is doing:
1) Homeowner receives legal answers for legal questions, legal counseling for decisions with legal consequences. They’re also sent to tax pros for tax questions. Initial fee is $195 which is affordable for most and it comes with a money back guarantee.
2) FRG educates the homeowner on the short sale and loan mod process and I just happen to like it when homeowners are able to really learn about the entire short sale and loan mod process before they get all excited about either one, and so they can avoid the loan mod scammers or hire a real estate broker with short sale experience instead of hiring a friend or family member who has never successfully closed a short sale.
3) FRG provides counseling or, for lack of a better word, coaching on how to financially prepare for a short sale, loan mod, or foreclosure.
4) FRG does NOT perform loan modification services nor do they perform short sale negotiation services. I like this because FRG has no stake in the homeowner’s final decision.
5) FRG also provides counseling/coaching on how to rebuild your credit history and your financial life after your short sale/loan mod/walk-away.
6) FRG offers mental health counseling to homeowners by a licensed mental health care provider. Some of you are probably thinking, “What weenie would need a therapist?” Well sometimes it’s helpful to talk w/someone about big life transitions so we don’t take out our pent up emotions on the people we love.
Licensed real estate brokers and Realtors are focused on listing and selling. Yes, they also do some listening and counseling but if a homeowner isn’t ready to sell, why would a licensed real estate broker or Realtor counsel a person for free? I suppose a Realtor might answer, “I already counsel my short selling homeowners for free as part of my listing services.” Okay, that’s fine. But can that same listing broker ALSO provide financial counseling on loan mods or foreclosure? There are likely some listing brokers or Realtors who know quite a lot about short sales and loan mods and I had one as a student last Tuesday but how many Realtors know that the Home Affordable Modification Program has gone through no less than 40 policy changes since its inception? How many listing brokers know who does/does not qualifies for a HAFA Short Sale and the reasons for/against pursuing HAFA? For that matter, if a homeowner only hires an attorney, how many attorneys are well versed on short sales, loan mods beyond the legal consequences?
Reasons against using FRG
1) In order to access the entire FRG program, the cost is $2995 (readers please note the date of this blog post and check with FRG for their current fee schedule.)
Suggestions for Financial Revival Group:
1) Get rid of any referral fee program offered to Realtors or LOs. If indeed what you’re doing is working well, you WILL get referrals. Instead, coach or train the Realtors and LOs on some of FRG’s secrets. Don’t worry about giving away your secrets. Chances are they’re not secrets and the Realtors and LOs will see them as gifts.
2) If there as any, get rid of referral programs on the other side. This means any Realtor, loan mod provider, or short sale negotiator who receives referrals from FRG should receive them because they have a HIGH success rate and not because FRG is receiving anything behind the scenes.
3) Make the Realtor/LO referral program reciprocal meaning, if a Realtor refers a client, that same Realtor will receive the client back as a short sale listing. If a loan originator refers a client, that same LO receives the client back…..uh, someday many years in the future. If an attorney refers a client, make sure that same attorney receives the client back.
4) Make it plain-as-day crystal clear why a homeowner should part with money to receive counseling that they could otherwise receive for free from HUD Approved Housing Counseling Agencies. (WA State borrowers go here, other states find default counseling here.) Maybe create a table or chart comparing free v. paid counseling.
5) Spell out, in great detail, why a homeowner should part with money that could be used to pay for lots and lots of legal counsel, though I think the answer might be, because attorneys know the legal side of short sales and foreclosures very, very well but they might not have all the practical knowledge that comes from successfully working with loan servicers.
6) Make sure that FRG is complying with all state and federal laws governing service providers who help homeowners in financial distress. Become a friend of local regulators and go beyond getting legal opinions. Invite regulators to scrutinize every square inch of your business model up to and including a rectal exam if that’s what they want. I am not entirely convinced that FRG’s counseling services don’t fit into the FTC MARS provider rules since FRG’s business model dances right up to the edge.
7) Do a gut check on whether the employees at FRG favor one solution over another (ss v. loan mod v. walk-away) because that favoritism will come through unless you own it.
At some point in the future, the Federal Reserve Board will raise interest rates gradually. Some might say the master plan all along is to gently inflate our way out of this god-awful real estate mess. If and when that happens, all these underwater homeowners might find themselves surprisingly less underwater than they previously thought. It is terribly difficult to try and uncover all the possible consequences of a choice.
I am all for homeowners taking responsibility for educating themselves as best they can before making a decision to become a walker. It looks like FRG is offering, for a fee, a chance for people to fully educate themselves. At this point, I do not see many real estate brokers or loan originators who are able to provide a similar fee-based, unbiased counseling service.
FRG’s biggest challenge will be to convince homeowners that FRG is not just another foreclosure scam. Maybe getting rid of all upfront fees is the best solution for FRG along with offering homeowners an alacart pay-as-you go counseling menu. My last recommendation is for FRG to run everything by the state attorney general’s office and get their feedback in writing for their future legal defense files. That way when a regulator shows up at office, they’ll be ready.