Foreclosure rescue scheme
Encyclopedia
A foreclosure rescue scheme is a scam that targets those whose house is facing potential foreclosure
. The scheme preys on desperate homeowners whose mortgages are in default by offering to prevent the foreclosure. There are various ways in which foreclosure rescue schemes work, causing different types of harm to the homeowners, but all ultimately with the likely end result of the owner being forced out
of his/her home and losing even more money.
Foreclosure rescue schemes are typically advertised in a variety of informal settings, such as roadside signs.
of the property.
all the equity
in the home. The perpetrator also collects money from the victim by charging rent
to the victim for living in the house while not owning it.
The final result is eviction
from the house with zero equity paired with greater financial loss to the victim. The perpetrator, who then has ownership of the home, will either sell the property or allow it to go into foreclosure.
When negotiation does take place the firm may put in place a deal to buy the property from the lender, if the equity value of the property has reduced, then this may be at a lower price than the current outstanding debt. Lenders may accept this to guarantee payment now, rather than gamble on future values, ability of the owner to pay etc. In these cases the situation can be similar to the other schemes with the original owner being offered the option to rent the property with a future buy back. As for the other schemes in a scam situation the terms of any tenancy or buy back may also be set to the gross disadvantage of the original owner.
The United States Federal Government has been taking action to crack down on foreclosure rescue schemes. In 2009, the Obama Administration's anti-fraud initiative combines federal and state law enforcement efforts in fighing foreclosure rescue.
In 2007, the state of Massachusetts
passed emergency legislation making it illegal for 90 days to operate a foreclosure rescue scam. The intention was to follow this up with a permanent ban.
Foreclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
. The scheme preys on desperate homeowners whose mortgages are in default by offering to prevent the foreclosure. There are various ways in which foreclosure rescue schemes work, causing different types of harm to the homeowners, but all ultimately with the likely end result of the owner being forced out
Eviction
How you doing???? Eviction is the removal of a tenant from rental property by the landlord. Depending on the laws of the jurisdiction, eviction may also be known as unlawful detainer, summary possession, summary dispossess, forcible detainer, ejectment, and repossession, among other terms...
of his/her home and losing even more money.
Foreclosure rescue schemes are typically advertised in a variety of informal settings, such as roadside signs.
Lease-buyback
In a lease-buyback scheme, an offer where the owner can turn the lease over with an option to buy it back later. The owner is promised to be able to rent the property back, which will be counted toward an eventual buyback. These can be legitimate; however, in a scam they may end in loss of the property or considerable additional cost: the renting prices may be made so high that the original owner cannot afford to continue paying and/or the buyback price may be set far above the fair market valueFair market value
Fair market value is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market. An estimate of fair market value may be founded either on precedent or...
of the property.
Equity stripping
Equity stripping or equity skimming is a variation on lease-buyback and is one of the most common types of foreclosure rescue schemes. In it, the perpetrator assumes ownership of the house while allowing the former owner to continue living there, provided that s/he pay rent to the perpetrator, who is the new owner. The perpetrator often claims this ownership is temporary, and the victim will later reassume ownership of the home once the terms of the loan are renegotiated. But after taking over the deed to the house, the perpetrator cashes outCash out refinancing
Cash out refinancing occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses.-Definition:...
all the equity
Home equity
Home equity is the market value of a homeowner's unencumbered interest in their real property—that is, the difference between the home's fair market value and the outstanding balance of all liens on the property. The property's equity increases as the debtor makes payments against the...
in the home. The perpetrator also collects money from the victim by charging rent
Renting
Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
to the victim for living in the house while not owning it.
The final result is eviction
Eviction
How you doing???? Eviction is the removal of a tenant from rental property by the landlord. Depending on the laws of the jurisdiction, eviction may also be known as unlawful detainer, summary possession, summary dispossess, forcible detainer, ejectment, and repossession, among other terms...
from the house with zero equity paired with greater financial loss to the victim. The perpetrator, who then has ownership of the home, will either sell the property or allow it to go into foreclosure.
Consulting service
A firm may offer to act as an agent to renegotiate the terms of a loan with the lender, in return for a fee. The firms are unlikely to have any better negotiation power so the value of the fee maybe disproportionate the to the service received, the firm may be unable to negotiate any better terms or in the worst cases may not contact the lender. Firms may also encourage the original borrower to avoid any contact with the lender, under the guise that such contact would interfere with their efforts to secure a modification, when in fact it may reveal that the firm has not contacted the lender at all.When negotiation does take place the firm may put in place a deal to buy the property from the lender, if the equity value of the property has reduced, then this may be at a lower price than the current outstanding debt. Lenders may accept this to guarantee payment now, rather than gamble on future values, ability of the owner to pay etc. In these cases the situation can be similar to the other schemes with the original owner being offered the option to rent the property with a future buy back. As for the other schemes in a scam situation the terms of any tenancy or buy back may also be set to the gross disadvantage of the original owner.
Fighting foreclosure rescue
Laws in all 50 U.S. states prohibit the operation of foreclosure rescue schemes.The United States Federal Government has been taking action to crack down on foreclosure rescue schemes. In 2009, the Obama Administration's anti-fraud initiative combines federal and state law enforcement efforts in fighing foreclosure rescue.
In 2007, the state of Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
passed emergency legislation making it illegal for 90 days to operate a foreclosure rescue scam. The intention was to follow this up with a permanent ban.