Have you ever heard of Equity Stripping? It can be done in two ways – both very scary, both leaving you, the homeowner, with little to none of the equity you’ve worked so hard to build.
The first technique involves an investor and an unlawful appraiser:
Unscrupulous appraiser creates a report stating that you house is worth more than its current value.
Investor gets you to refinance.
Cash is paid to the investor at closing.
The process is repeated.
Initially, your payments may drop, but your loan balance increases due to high fees and repeated refinancing. The equity you had built up is being paid out in cash during each closing. This scam is primarily for homeowners who have a large amount of equity in their homes.
The second technique works similar to a Leaseback:
You deed your home to an investor.
You sign a rental agreement.
The investor may offer you an option of buying the house back in the future (for a higher price than you sold it to them).
The investor pockets the rent you pay.
THE INVESTOR NEVER MAKES A PAYMENT...
... and you have no idea until you receive another threatening letter from the mortgage company asking for their money. The investor has been cashing your rent checks, and has not made a payment on your mortgage loan.
At this point, I want to mention again that, even though we use the term “vultures” and are painting some very scary scenarios, not all investors, mortgage brokers, realtors, or foreclosure consultants are deceitful. Not everyone who comes to you offering assistance is unscrupulous. It IS important, however, to be informed of the scams that are out there so you can protect your home.
Forewarned is forearmed!
Friday, April 10, 2009
Thursday, April 9, 2009
Foreclosure Scams: Trust Agreements
The Trust Agreement scam is similar in nature to the Escrow scenario.
What is a Trust? Wikipedia.com defines a trust as an arrangement whereby money or property is owned and managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a Settlor, who entrusts some or all of his property to people of his choice (the Trustees). The trustees are the legal owners of the trust property, but they are obliged to hold the property for the benefit of one or more individuals or organizations (the Beneficiary), usually specified by the settlor.
Here’s how the scam works:
Investor offers to bring your loan current.
Investor charges $1000 (or a similar amount) to pay all legal fees for setting up a trust.
The trust is set up as “66 Lincoln Street Jones Family Trust” (assuming your name is “Jones”, and you live at 66 Lincoln Street).
The deed names the investor’s company (ABC Investments, Inc.) as the Trustee.
The deal is structured so that once the loan is repaid (plus a management fee), the trust will then deed the house back to you.
Can you see the scam working?
In this scenario, it is very easy for an investor to put you at ease and use “trust” to con you out of your home. You assume that because the trust is named for your home and family, you have a controlling interest. In truth, ABC Investments, Inc, controls the trust, and THE TRUST NOW OWNS THE HOME. You have just given your property away, but you are still obligated to pay for it. Miss a loan payment? You are evicted, and you have no legal ramification, because you no longer own the home.
What is a Trust? Wikipedia.com defines a trust as an arrangement whereby money or property is owned and managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a Settlor, who entrusts some or all of his property to people of his choice (the Trustees). The trustees are the legal owners of the trust property, but they are obliged to hold the property for the benefit of one or more individuals or organizations (the Beneficiary), usually specified by the settlor.
Here’s how the scam works:
Investor offers to bring your loan current.
Investor charges $1000 (or a similar amount) to pay all legal fees for setting up a trust.
The trust is set up as “66 Lincoln Street Jones Family Trust” (assuming your name is “Jones”, and you live at 66 Lincoln Street).
The deed names the investor’s company (ABC Investments, Inc.) as the Trustee.
The deal is structured so that once the loan is repaid (plus a management fee), the trust will then deed the house back to you.
Can you see the scam working?
In this scenario, it is very easy for an investor to put you at ease and use “trust” to con you out of your home. You assume that because the trust is named for your home and family, you have a controlling interest. In truth, ABC Investments, Inc, controls the trust, and THE TRUST NOW OWNS THE HOME. You have just given your property away, but you are still obligated to pay for it. Miss a loan payment? You are evicted, and you have no legal ramification, because you no longer own the home.
Wednesday, April 8, 2009
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.
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.
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