Foreclosure Scam VARIATIONS
RENT-TO-OWN OR LEASEBACK SCHEME
A scammer urges you to surrender the title or deed of your home as part of a deal that will let you stay in your home as a renter and then buy it back in a few years. He may tell you that surrendering the title will permit a borrower with a better credit rating to get new financing - and keep you from losing your home.
The scammer may have NO intention of ever selling the home back to you.
The terms of these deals usually make buying back your home IMPOSSIBLE. Worse, when the new borrower defaults on the loan, you’ll be evicted.
VARIATIONS OF SCHEME
- The scammer raises your rent over time to the point that you can’t afford it. After missing several rent payments, you are evicted, leaving the “rescuer” free to sell your house.
- The scammer offers to find a buyer for your home, but only if you sign over the deed and move out. The scammer promises to pay you some of the profit when the home sells. But the scammer simply rents out your home and keeps the profits while your lender proceeds with the foreclosure. You lose your home and are still responsible for the unpaid mortgage because transferring the deed does not affect your mortgage obligation.
SHORT SALE SCAM
Scammers sometimes called “short sale negotiators” or “short sale processors" may promise to expedite a short sale and usually require you to pay a fee, which is illegal in many states.
Some scammers may even include surcharges or hidden fees before the transaction closes, which is also illegal in many states. The scammer may also misrepresent the value of the home to the lender.
A short sale may be a legitimate option for a homeowner in default or a homeowner who is current yet the value of the home has fallen – if the lender agrees to a short sale.
But homeowners should only work with a licensed real estate professional or licensed real estate attorney since the law requires that the person be properly licensed to negotiate the short sale with your lender.
Homeowners should verify licenses with their state licensing agencies.
BANKRUPTCY TO AVOID FORECLOSURE
The scammer may promise to negotiate with your lender or get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, he pockets the fees and files bankruptcy in your name – sometimes without your knowledge.
A bankruptcy filing often stops a home foreclosure, but only temporarily. Filing bankruptcy stops any collection and foreclosure while the bankruptcy court administers the case. But eventually you must start paying your mortgage, or the lender will be able to foreclose.
You could lose the money you paid to the scammer and your home. Worse, a bankruptcy stays on your credit report for 10 years, which makes it difficult to obtain credit, buy a home, get life insurance or even get a job.
ACCC’s HUD-approved housing counseling agency offers HECM (reverse mortgage) counseling nationally and foreclosure counseling to Massachusetts residents. If you are seeking debt relief via housing counseling, contact ACCC here.