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The Miami Herald
July 24, 2005 Sunday F1BZ EDITION

'Surplus chasers' make the most of rising home prices;
An industry where people collect money from foreclosure home sales for a fee has cropped up in Florida, thanks to rising housing costs in the state.;

REAL ESTATE

BYLINE: BY NATALIE P. McNEAL

South Florida's red-hot housing market is creating a cottage industry that's being boosted by people who default on their mortgages.

Known as ''surplus chasers,'' these businesses collect money left over from a home's foreclosure sale and return it to the people who have lost their homes -- for a fee of up to 40 percent. The fees have drawn the ire of some state lawmakers who want to regulate the industry.

Run by lawyers, or those with some legal knowledge, the companies target people like Joanne Parziale.

Last October, Parziale was told she had a $20,000 surplus from the foreclosure sale of a home in northwest Fort Lauderdale.

Parziale said she didn't know the money was due to her until a representative from Foreclosure Refund Corp. knocked on her door.

She received 80 percent of the surplus while the company received 20 percent. ''It turned out great,'' Parziale said. ''They did all the work. I didn't know I had the money coming. The 20 percent was well earned as far as I'm concerned.''

But critics, including two state legislators and the Broward County clerk of the courts, are complaining that the surplus chasers charge too much, sometimes 40 percent of the money. Court personnel complain the fees are too high for the minimal amount of work.

After all, the money belongs to the former homeowner but requires them to go to court to claim it.

''It's Broward's dirty little secret,'' said Howard Forman, who, as Broward County clerk of the courts, deals with thousands of foreclosure proceedings annually. ''Innocent people are giving away their money that could be used to send their grandchildren to college or be saved for retirement.''

However, those in the business say they are performing a much-needed service.

''We're out there, trying to help these people,'' said Michael Peluso, president of Fort Lauderdale's National Equity Recovery Services. ''How many companies are trying to do that?''

RISING TRENDS
Over the past five years, the surplus chasing business has flourished.

Since housing prices have increased -- 34 percent over the last year, according Florida Association of Realtors -- homes that go into foreclosure often have a healthy amounts of equity left after banks and other creditors retrieve what they are owed. These chasers grab a cut of the leftover money.

In 2004, 9,606 foreclosures were filed in Miami-Dade County. Broward had 5,303 circuit civil court foreclosure filings, last year.

Most foreclosures are a result of owners defaulting on their mortgages. The bank sues, and if the homeowner doesn't pay up, the property can be sold at a courthouse auction. After the home is auctioned off, creditors are paid with the proceeds. The excess money belongs to the former homeowner and goes into a court registry.

Peluso estimates about 15 to 20 surplus chasers do business in Miami-Dade and Broward counties.

He started National Equity Recovery 2 1/2 years ago after working in the home rehab business.

Through researchers combing court records, the surplus chasers find out which foreclosure sales have money left in the court registry. Then the chasers try to contact the former homeowners, by phone or by knocking on doors, and offer to reclaim the money in exchange for a cut.

Peluso says out of every five people he tracks down, maybe one wants to sign the agreement.

DO IT YOURSELF
Critics say this is unnecessary because homeowners can claim the money themselves.

When Broward homeowners are served with foreclosure papers, the clerk's office includes a note telling them that they are entitled to any funds leftover after auction, and that they don't need a lawyer to get the money.

Nevertheless, many do not check to see if there is money left over from the sale.

''People who have lost their homes oftentimes the rest of their life isn't going too swell,'' said Iris Siple, chief administrator for Forman's office. ''They just want to resolve any issue and get out of the home as quickly as possible.''

The former homeowners can come to the courthouse and the staff will help process their paperwork to get their money back, Forman said. The procedure also includes a hearing before a judge.

But those in the surplus-chasing business say that's it's more complicated than filling out forms.

Peluso says that his company, which uses researchers, lawyers and private investigators, navigates the sometimes-intimidating judicial system on behalf of the clients. The people who have moved away from the home, he says, can be difficult to find.

Solomon Negrin, 79, owned a condo in Sunrise with his ex-wife. When the property was foreclosed, National Equity Recovery Services contacted him.

Under the deal, $22,662 of the money was left over and Negrin got 80 percent, through a deal with National Equity Recovery Services.

''In the end they sent me a check, I didn't think I had anything coming,'' Negrin said. Negrin said he didn't know he could recover the money on his own.

''You think that an attorney can help you, but you learn late in life that they care more about the money and less about you.''

VARYING RATES
Peluso says his prices vary, depending how much work it takes to find the people. Court records examined by The Herald showed that he charged 20 percent in one case and 30 percent in another.

But not everyone has as a positive experience with surplus chasers.

In April 2004, the Florida Bar received a complaint that a woman, whose home was foreclosed on, had her surplus funds siphoned by an an attorney who never represented her.

The Florida Bar suspended Miami-Dade lawyer Terry Rosenberg this year, accusing him of running a scam with a company called Global Heir and Assets to collect undeserved money out of 300 homeowners.

Legislators say it's time to regulate the industry.

Last session, State Rep. Ari Porth, D-Coral Springs, and Sen. Skip Campbell, D-Tamarac, unsuccessfully tried to get a bill passed to regulate the industry.

The bill called for the court to determine a ''reasonable attorney fee'' for motions to disperse surplus funds.

''We want to do something to stop these vultures,'' said Porth, who plans to reintroduce the bill next year. ''People need to know they don't need an attorney to get their money.''

 

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