It's often said that an ounce of prevention is worth a pound of cure. This is especially true when discussing real estate transactions. This month we are going to discuss foreclosure rescue schemes and some things of which homeowners should be weary. People struggling with mortgage payments are in a vulnerable position not only to the unyielding demands of their mortgage company, but to those looking to swindle quick profits.
Homeowners behind on mortgage payments may find themselves approached by people promising to "save their home" and "guaranteeing to stop foreclosure". Others may encounter lenders assuring foreclosure can be avoided through refinancing. If you or someone you know find themselves in that position, it is critical that you consult with a qualified attorney to review your situation and any paperwork before you sign anything or hand over any money otherwise you may find yourself a victim of equity stripping.
Equity stripping or equity skimming as it is sometimes known can take on many forms. Typically it involves a promise to assist a distressed homeowner and save their home from foreclosure. Somewhere during the process the homeowner transfers ownership to the person promising assistance or a "straw" buyer who cashes in any equity in the home and keeps the money. The homeowner almost inevitably ends up losing their home and any equity in it.
Remember just because you are behind on your mortgage payments does not mean your home is underwater or can't be sold for profit. You may in fact be late on your mortgage payments and still have equity (the difference between what you owe on the home and what you could sell it for) in your home. Desperate to save their homes, many people have transferred property to third parties with the promise that they could continue to lease the property and buy it back at a later date once their finances improve.
Homeowners may not even realize they have transferred the property or may be told it is necessary to delay the foreclosure. Either way the homeowner finds himself or herself in a contract including unaffordable monthly payments and burdensome repurchase terms which almost guarantee failure. The homeowner is evicted and/or has the house sold from underneath them because they signed a deed relinquishing ownership and authority over the property.
Homeowners need to be aware that short of filing for bankruptcy protection, a court order or a lender's voluntary postponement, there is no guaranteed way to stop a foreclosure. Additionally, any legitimate lender willing to refinance you will require a consistent and up to date mortgage payment history demonstrating that you have been paying your current mortgage. As a practical matter no lender wants to give you a new loan if you have not been making payments on your old one.
Foreclosure rescue schemes are illegal in Massachusetts and many other states and the Attorney General's office routinely prosecutes these matters, but homeowners must remain vigilant. If you are looking for assistance preventing foreclosure, avoid any business that:
- Instructs you to make your mortgage payment to them, rather than your lender
- Makes recommendations without thoroughly reviewing your finances (Note: Anytime someone struggling with mortgage payments contacts me I recommend setting up an appointment to review their financial situation. I follow that conversation up with a checklist of documents which will be useful for our meeting)
- Tells you they have an investor who will buy the property from you and lease back to you with the option of repurchasing it
- Directs you to transfer title or sign over a deed to your property
- Guarantees to stop your foreclosure
- Insists you sign paperwork which is not explained or that you do not understand
- Insists you not contact an attorney or doesn't provide the opportunity to have paperwork reviewed by a third party
There are many scams out there that homeowners need to be aware of, but all this confusion can be avoided. As soon as you experience trouble making your mortgage payments, contact an attorney so they can review your situation before you make any decisions. Our office assists many homeowners struggling with their mortgage payments and thoroughly reviews all finances before making recommendations. Please do not hesitate to contact us if you or someone you know may be in need of our services.
-Andrew R. Martignetti, Esq.
Information in the above article is for educational purposes only and does not create an attorney-client relationship. You should not construe this to be a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel.
