I just recently read an article about a "radio foreclosure specialist" in New York who is being charged with being involved in an $800,000 mortgage scheme involving straw buyers.
Before I get into outlining the scheme, let me take a minute to say how disgusting this is. You put yourself on the radio, give advice, people TRUST you, and you rip them off. Intentionally. That is inexcusable.
Now, back to our regularly scheduled program. What's a Straw Buyer, you ask? Read below...
The Washington Post recently did an article on Joy Jackson and Metropolitan Money Store, Corp - a company in Maryland that allegedly used "straw buyers" to "help" customers in foreclosure save their homes. Why do I put the word "help" in quotations, you ask? Because if the Washington Post is doing an article on you and your company around the foreclosure issue, 8 out of 10 times, it's not to praise your and your efforts.
Yep, it's another scam. HUNDREDS of people lost hundreds of thousands of dollars, EACH. Read the article to find out how these homeowners' hard earned equity went to fund the lavish lifestyle of the owner and her family. It's crazy!
The scam works like this:
If you have a large amount of equity in your home, a company will offer to assist you by having your house "refinanced" with SOMEONE ELSE'S CREDIT. The company will then say that you have the opportunity to buy back the house (or refinance out the straw buyer) after a certain amount of time, and you can live in the house "rent free" until your financial affairs are in order.
Of course, there are several other details that go into the arrangement, but those are the basics. What's wrong with this picture?
This basic fact: if you use someone else's credit to "refinance", their name is on the deed. That means that THEY, not YOU, own the house. That's why the term "straw BUYER" is used... it is another person who comes in and BUYS your home. It is a sophisticated form of the Leaseback scam - but there is a person (straw) between you and the company that offers a solution. That person is paid to use their credit.
How are they paid? OUT OF YOUR EQUITY.
In the case of Joy Jackson/Metropolitan Money Store, it is alleged that after a homeowner signed up under her program and was "saved", she pulled the equity out of the home by borrowing against the home, which increases the resale cost of the property. This price is often way too high for the person who is living in the property, and they cannot purchase the home back from the new owner.
Again I say... if it sounds too good to be true, investigate carefully. This is your HOME you are gambling with, and you should be as informed as possible when it comes to foreclosure scams and fraudulent practices.
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