12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
Watch Out for Mortgage Fraud
By Richard BarringtonNFNS Columnist
With more and more mortgage
holders have trouble meeting their monthly payments, mortgage companies are
actively working with borrowers on solutions such as refinancing or
restructuring loans. Not surprisingly though, there are some less legitimate
people who are seeking to take advantage of a difficult situation. Here are
some things you should know to avoid being taken.
The Sell-to-Rent Scam
You can't make your mortgage payments, but you want to stay
in your home. You've spent money decorating it, and your kids are established
in the neighborhood and in the local schools. Plus, moving would just cost you
more money.
Then a white knight appears out of the blue. This person
will pay off your mortgage in exchange for the deed to your house, and then
rent the house back to you at a reasonable rate.
Here's what's really going on: the "white knight"
has borrowed money to buy your house. He pays off your mortgage balance, and
pockets the difference between his purchase loan and that balance --
essentially, taking the equity out of your home. He then disappears with no
intention of making payments on the new loan. The house defaults to a new owner
who has no obligation to honor your sweetheart lease deal.
The Inflated Price
Scam
In this scenario, you want to sell your house but prices in
your market are in a nosedive, and buyers are few and far between. You know you
are going to have to give any buyer a deep discount from your asking price.
Then a buyer emerges with a proposal: he will pay your full
asking price, if you will refund some of that price to him after the purchase. This
allows him to take out a mortgage in the full price amount, but immediately get
some cash back from you. This cash is what he is interested in, as he then
disappears and defaults on the mortgage.
While you are not on the hook for the new mortgage in this
situation, you may have unwittingly participated in a fraud -- effectively
falsifying the sales price of your home to defraud the mortgage company. You
can be charged with a crime even if you didn't directly profit from it.
Legitimate Solutions
Solutions that seem too good to be true probably are, and
meanwhile there are legitimate solutions to mortgage problems, such as refinancing
and restructuring. Keep in mind that lower interest rates have made refinancing
options more attractive, and mortgage companies can help you look at other ways
of lowering your monthly payments.
Research multiple mortgage companies from third-party
sources -- after all, legitimate companies don't operate under the cover of
darkness. Also, talking to different mortgage companies will put you in touch
with experienced professionals who can quickly clue you in to the reality
behind any shaky proposal that may have been made to you.
Source:
Freddie
Mac
About the Author:
Richard Barrington is
a freelance writer and novelist who previously spent over twenty years as an
investment industry executive.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.