Foreclosure Scams: The Equity Loan

When you think of “escrow”, you think “safety” and “security”, correct?

Wikipedia.com defines escrow as a legal arrangement in which an asset (often money, but sometimes other property such as a deed of title) is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition or conditions in a contract, such as payment of a purchase price. Upon that event occurring, the escrow agent will deliver the asset to the proper recipient, otherwise the escrow agent is bound by his or her fiduciary duty to maintain the escrow account.

In a foreclosure scam, however, a “deed in escrow loan” provides the exact opposite of safety and security.

Here’s how the scam works:

An investor offers to provide you with a loan to bring your loan current.
You sign over the deed to your home.
The deed is held in escrow (the investor will explain that this protects his investment and keeps their costs low).
You begin to make payments on the loan.

If you’re a day late with the payment, the investor will record the deed and evict you. You may not have documentation to prove that you were lent any money, but the investor CERTAINLY has a deed – signed by you – that proves you sold them your home.

If someone wants to lend you money to bring your loan current, sign a promissory note and give them weekly or monthly payments that you can afford. Any other lending scenario is probably presented by someone who does not have a license to lend money and is trying to get around state and/or federal lending practices. Are you willing to trust your most valuable asset – your home – to someone like this?

Think about that.