8/17/2007

Bill J. Gatten
North American Realty Services
6520 Platt Ave. #548
West Hills California 91307

Editor in Charge, A National Consumer Law Center Report
National Consumer Law Center
77 Summer Street 10th Floor
Boston, Mass 02110
In Re. Your June Article referenced below
Dear Sir/Mme,

Regarding the article written and published by you in June, 2005 in your Report by the Nation Consumer Law Center, we are respectfully requesting a formal published retraction of the erroneous portions in that report referencing myself by name and our programs (the section purportedly written by Dan Lipton, of the Harvard Law School Predatory Lending/Foreclosure Prevention Clinic, entitled “Stay Unassociated with the End Result. Caring Costs Money” and said to have been researched by your Steve Tripoli and Elizabeth Renuart.
We have not determined that your comments are actionable at all, and this is not a threat to sue. We are merely requesting a corrective or republished clarification of that specific portion of your text. If you would be so kind, please reread your article, reproduced in its entirely here below, along with my highlighted response to it.
Note that the seminar your Mr. Lipton claims he so clandestinely “infiltrated” and to which he refers in your publication, was a free public workshop that was recorded in its entirety, clearly verifying my refutation of virtually every-single assertion made by him in your article. In listening to the recording and reading your report, it appears that a malicious intent was in fact someone’s primary goal, rather than a quest for Truth on behalf of your clients.
In addition, there are 175 eye-witness workshop attendees who will readily attest to the inaccuracy of the information proffered by your article (as given to you by Mr. Lipton and purportedly researched by your staff).

YOUR ARTICLE STATES: “Bill Gatten spent two and one-half days in his seminar, going over the intricacies of the land trust. However, only one day of that time was devoted to substantial trust edification, with the remaining time devoted to selling his program (books, tapes, network fees) and doing “magic” to condition the audience that things are not always as they appear.

FACT: Our workshops are FREE, and I specifically do not discuss any services or products for sale until perhaps the last 30-40 minutes of the final day of the 2.5 days (2:30 to 3:00 pm on Sunday); and all I promote at that time is a one-on-one life-time personal mentoring program. The first evening of the workshop is devoted to an introduction to our services and the philosophy of, and tools for, self determination. Half of the first full day is spent in basic real estate terminology. The remainder of that day and continuing through until 2:30 PM on the third day, we discuss and carefully study trusts in general and the Illinois Land Trust in particular. From approximately 3:00 to 6:00 or 7:00 PM I make telephone calls in front of the audience to persons advertising homes for sale who, for higher profits, a faster sale and maximum safety are willing to leave some or all their equity in tact for a while..

YOUR ARTICLE STATES: “The two primary advantages of the trust emphasized were its ability to circumvent the Lender Due on Sale Clause (note: this clause requires mortgages to be paid off upon transfer of the property unless the mortgage holder gives written permission to the contrary)…

FACT: This statement is inaccurate and reflects a naiveté and lack of familiarity with the federal law being referred to. Title 12 of the U.S. Code (p.1701-j-3) clearly precludes any lender of record from foreclosure upon many types of legitimate transfers (nine of them, as a matter of fact), and in particular “…a transfer to an inter-vivos trust, wherein the borrow is, an remains, a beneficiary; and wherein the trust is revocable; and wherein the document itself does not relate to a transfer of occupancy rights (note here that any residential property from 1 to 4 units can obviously be leased or rented to another without the necessity of obtaining a lender’s permission, whether in such a trust or not).” The lender need not be consulted for permission to place one’s property into a legitimate inter vivos trust, so long as such placement is done within legal regulations and established and governmentally accepted guidelines, as reflected in The Code.

“…and to facilitate the fastest way to evict a lessee from “their” property if they default in their lease payments (note the lessee is generally the owner of the property who has surrendered ownership of the home in exchang for a foreclosure rescue plan that supposedly will allow recovery of the property later).

FACT: Another grossly misleading assertion. First off, our program is NOT first and foremost a “foreclosure rescue program.” We do NOT specifically target people or homes in foreclosure. Our primary target audience is those who owe too much to sell traditionally, or those who have explainable and rectifiable cash and/or credit challenges. Although…our system may in-fact be used quite effectively in assisting a homeowner under the threat of dispossession by their lender, by allowing avoidance of the foreclosure and retention of their homes…all without an upfront fee, or risk of losing their equity. In such a scenario (a tiny aspect of our business), our trust system provides the debtor the money they need to avoid foreclosure; reduce their monthly payments; and to retain 100% of the full Fee-Simple rights of homeownership…without a forfeiture, threat or possibility of forfeiture, or even a chance of a loss of equity in the event of a default (re. your term: “equity stripping”).

In such a “foreclosure bail-out” scenario, should the homeowner later default in its obligation (…again) and be unable to recover: it is clearly agreed by parties that the non-defaulting benefactor must pay the defaulting party 100% of any equity the defaulting party would hold in the property at the time of default (i.e., equity held from inception and/or accumulated over the term of the agreement).

Regarding “rapidity of eviction” being our goal…that assertion is (if I may say so) quite silly…eviction of an errant takes the same amount of time whether the property is in a trust or not. Our “goal” is merely the prevention of the deceitful and spurious acts of a resident party in default, who would resort to unscrupulous tactics to unlawfully detain the property and defraud his/her benefactor after the fact (a most common practice).

YOUR ARTICLE STATES: “Lipton notes that the trust is supposed to give owners facing foreclosure a chance to buy back their property if the trust agreement is followed to fruition. But he writes that “this scenario is extremely unlikely” because terms of the buy-back are so onerous, and there are so many ways to drain equity from the property before the agreement’s end, that the initial homeowner is unlike to recover.

FACT: Again I’ll suggest that editorial licenses by your own staff may have been taken here, without Mr. Lipton having said any such a thing. But be that as it may…even when our program IS used (rarely) for safety and mutual protection of parties in a “foreclosure bail-out”) there is specifically no “onerous” buy-back provision! The homeowner and the benefactor have contractually agreed that once the property can be sold or refinanced by the homeowner at the scheduled termination date of the trust, following a return of the debtor’s equity, the benefactor’s initial contribution will be returned to him/her along with, perhaps, some percentage of the property’s accumulated appreciation over the term (usually 10%, but up to a maximum of 50%)...should there have been any such appreciation…but NEVER is any significant portion of the debtor’s equity taken!

In the above scenario, in order to entice a moneyed benefactor in the first place, a debtor in foreclosure may in fact have offered that person a small percentage of his/her equity in the property at inception (to be paid at termination, years later) as an investment buffer, for the quite real possibility of there being no appreciation at all over term (note, though, that such divesture of equity at start, will not, in our program, exceed 10% of the property’s verifiable market value at the time). Furthermore, with the trust’s corpus (the property) having been vested in an unrelated, third-party trustee, co-beneficiary land trust, there is absolutely NO WAY for either party to “drain equity” from the property, or take unconscionable advantage of the other at any time…ever…period! That’s exactly why we do things the way we do.

YOUR ARTICLE STATES: “In his report Lipton poses the question: “What is the likely result of the trust agreement?” and answers: “The most likely result (client) could have anticipated when signing the trust agreement is exactly what the other co-beneficiaries hoped for: a default on (the client’s) obligations resulting in an implied intention to sell their beneficial interest, followed by a quick eviction from the home. As Gatten preached over and over again in his seminar program, “Stay unassociated with the end-result, and caring costs money.” He specifically gave an example where it was necessary to evict an elderly woman from her home after her husband had passed away and she could not meet her obligations.

FACT: This paragraph is unquestionably a purposeful distortion of Truth. First, there is no such un-named “client.” The scenario being alluded to has never happened with our program…not one single time…EVER (since our beginning in 1984)!

Next, no investor anywhere wants to endure the eviction process of a non-paying tenant to whom he has to pay 100% of all of the property’s existing equity upon their departure. That’s ridiculous!

Next, as stated with only partial accuracy, “Gatten” does indeed say, “…don’t be attached to the outcome.” However, what your writer (or over zealous editor) purposely omitted (for effect, I presume) is the first part of that mantra: “Be honest AND remain unassociated with the end-result.” In our course, we teach, above all else, that honesty, attentiveness and not forcing any situation or perceived opportunity to one’s own self-serving advantage is the secret of attaining true Wealth in life. And note carefully that the term “Wealth” in this context needn’t connote just ‘pecuniary’ gain). I have never said “caring costs money”…ever. It’s “Caring Costs Too Much.”

And, as well, the “widow eviction” example was grossly and obviously misreported. The “elderly” widow referenced in a passing comment (a Mrs. Joyce Reed, San Bernardino, California, age 42) lived in the property for several months, rent-free (at my insistence), after her husband died. She was told to utilize the trust’s Contingency Fund to continue her uninterrupted tenancy, property taxes, insurance and payments to the lender. Once her affairs were finally in order, she moved away (of her own volition), and was refunded all of the remainder of the Contingency Fund when it became apparent that she couldn’t afford the property any longer. This woman had no equity in the property at the time, and remarked repeatedly how grateful she was for the integrity of our trust system that gave her “breathing-room” when she needed it most. The story, when shared at the referenced workshop was to point out that had the woman been an evil or mean-spirited person (which she was not), as are many tenants in default, our system would have prevented her from avoiding payment and unlawfully detaining the property.

YOUR ARTICLE STATES: “After reviewing likely outcomes for the trust as he understood it, Lipton penned the following conclusion:” The different results create a lose-lose situation for someone like (client).

FACT: Again, there is not, and never has been, any such client! And further, the system that is being so inaccurately reported on is widely touted as clearly creating a Win-Win situation for everyone involved. The”lose-lose” comment is without the slightest merit, provocation or foundation.

YOUR ARTICLE STATES: “There is no way that (client) would ever be able to repurchase her home from the trust.

FACT: Patently untrue! Such a client (should one exist) would have the absolute contractual right and open power at termination to: 1) refinance, 2) sell, 3) extend the agreement, or 4) Walk-away with all of "her" equity fully intact.

YOUR ARTICLE STATES: “If (client) did see the trust to fruition, all she could hope for would be to accrue some amount of the appreciation value.

FACT: Again, untrue (and strongly believed to be purposely so). There has never been a single party…EVER…in our 3,000 plus transactions who has ever met any such fate. At termination of this hypothetical scenario, the mythological “client” would retain 100% of “her” equity; 100% of her equity build-up form the loan’s principal reduction; 100% of her active income tax deductions; and whatever percentage of the accrued appreciation she agreed to in the beginning (…never less than 50%).

YOUR ARTICLE STATES: “But at this point, where is (client) to go? Gatten knows that the resident/beneficiary wants to stay in their home as long as they can. Thus he puts in a nice provision into the occupancy agreement that allows the resident/beneficiary to stay in the home on a month-to-month basis for as long as the trust term (20 years) after the original period has expired.

And that’s a bad thing? The tenant beneficiary retains “her” home with all the benefits of ownership, and has all the time in the world to sell or refinance…or she gets paid in full and leaves, if she so desires. And…in our program it is she (your dreamed-up “client”) as the directing beneficiary who is the only person who can instigate her own eviction or dispossession other than for cause (violation the contract), as discussed above. Would any fair and honest person prefer that we NOT give her those rights?

YOUR ARTICLE STATES: “Basically, if the resident beneficiary has not defaulted yet, give him time, he eventually will.

Really? This is your assessment of your fellow human being? “Give the mooch time and he’ll just default again?” This is the kind of intellect I’m having so much trouble dealing with here. I’m proud to say that I/we tend to have a considerably higher respect for, and confidence in, the people with whom we deal. Our methods clearly assure any homeowner in default that they will NOT have to relinquish their hard-earned equity, even were they to default in their payment obligations a second time.

YOUR ARTICLE STATES: “This does create a scenario which fits nicely with Bill Gatten’ mantra, one that he repeated over and over again: “Caring costs money, and stay unassociated with the end-result.”

FACT: The “mantra (your term)” is misquoted, as well as grossly misunderstood. It would be accurately re-stated as: “Be honest and stay unattached to the outcome…caring costs ‘too much.” The “costing too much” in this context has nothing necessarily to do with money...it refers to integrity, fairness, accurate reporting of events and treating our fellow humans beings with respect and dignity. We teach that when one “cares too much (i.e., anticipating a profit…or maybe just an ‘Atta Boy’ for a job assumed to have been well done),” he will all too often be tempted to purposely misstate pertinent facts to the detriment of another person or idea solely in order to ingratiate himself with his peers and/or superiors of like mind…and spirit. I truly pity the person who has missed this (so extremely valuable and crucial) concept, as Mr. Lipton or your editors have, I fear…”Caring too much about a given hoped-for self-serving outcome will invariably cause one to compromise his/her own integrity…it’s never worth it.

YOUR ARTICLE STATES: “The complexities of the trust make it difficult for anyone to understand. As a law student who has taken property, real estate litigation and fiduciary relations I had trouble keeping up with what it all meant…it took me at least two weeks to put it all together.”

FACT: The total complexity of our program follows (but do beware it apparently takes some of our slower students as much as two weeks “to get it”). As an aside: do note that (despite needing to be capitalized), having taken Property, Real Estate Litigation, and Fiduciary Relations—does not a fair and “un-agendized” person make; nor does it place this student in a superior position of knowledge over those of us (and our own in-house and retained legal counsel) who have taken the same courses and fully understand and apply their concepts every day of our lives.

What we teach is that, in order to best avoid the myriad pitfalls, risks and rampant deceit of so-called creative financing…JUST DON’T DO IT! There’s a better and far safer way.

We maintain that one would be wise, if confronted with the need for seller financing, to place the property safely into a bona fide and fully legal 3rd party trustee, beneficiary-directed land trust, as doing so is directly analogous to holding the property in Escrow for the term of the agreement. From that point on, one need only deal with the trust’s beneficiary interest rather than the property’s ownership (title). Ergo, any beneficiary of such a trust with at least a 10% interest in it, whether on title, on the loan, living in the property or not, is fully entitled to 100% of all the Fee-Simple benefits of real property ownership (including income tax deductions). And all of this is effected wholly without comprising a lender’s security interest, violating their due-on-sale clause, subjecting the property to either (any) party’s creditor liens, lawsuits, bankruptcy actions, actions in marital dissolution, IRS tax liens, partition action, creditor charging orders, probate or ancillary intestate administration…or loss of equity.

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Some Frequently Encountered Arguments to Put an End To, Before They Crop Up From Other Inadequately Informed Detractors:

Title 12 of the Code of Federal Regulations (12CFR 591-vi), which appears to contradict the US Code (12 USC 1701-j-3) is specifically not a law! This entry in the title is, instead, a notation of prima facie evidence of the regulations found in the US Code.

Title 12 of the CFR (as originally promulgated by the Federal Home Loan Banking Board, FHLBB, which is now the OTC - Office of Thrift Supervision) is one of several CFR titles that specifically have not been enacted into law (See Sec. 204 of Title 1 of the Code).

The IRS authority for full income tax benefits by a resident beneficiary in a qualified property, who need not be on the property’s title or on the loan: IRC §163(h)4(D) also see IRC §677 and IRR 92-105

The “Illinois” land trust is legislated, authorized or accepted in principal and effect throughout the US, excluding only Tennessee and Louisiana. Its legitimacy in a particular state relies solely on that state’s acceptance of inter vivos real estate trusts in any form wherein the trust is not characterized (by the state) as a lien on the real estate (i.e., re. ownership in Use Vs. Trust), as well as reliance upon: 1) the Doctrine of Equitable Conversion, 2) the Doctrine of Merger) 3) the exclusion of “land trusts” per se from any extant Statute of Uses.

Our fervent desire and our company objective is to provide safe and legitimate solutions (via our land trust systems) for those who would deign to be investors, and/or real property owners of any kind, who would forgo enormous ill-gained profits in exchange for security and safety (e.g., avoidance of all the dangers, risks, pitfalls, downsides, and need for subterfuge in real estate acquisition and disposition).

Note that in our program the subject property is not being sold, or transferred beyond the owner’s (settlor’s) nominated trustee: even though all the features and benefits of homeownership can be passed to and enjoyed by a remainder agent/co-beneficiary who would live in, and maintain, the property under a properly structured leasehold agreement with the trustee.

Q: Think about it. Instead of the standard gloom and doom: What about a future headline in your publication that would read something more like:

Is There Is In Fact Finally a Safe and Legitimate Way to Avoid the Unscrupulous and Unconscionable Practices of Those Who Prey Upon the Down-and-Out and Disenfranchised?”
Sincerely,

Bill J. Gatten
North American Realty Services Consultants
POB 6520 Platt Ave. #548
West Hills, California
1 (800) 207 4273


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