Another scam that has cost people their homes...
When a foreclosure is pending, an agency may approch the family offering to 'help them avoid foreclosure' AND 'keep their home'. The agency will offer to pay up the mortgage (make it current) and keep making payments for a period of time. The homeowner then signs over the title to the house, 'just for a while', until they have a chance to 'get caught up'.
Reality: The agency brings the mortgage back up to date, but now 'owns' a home with usually several years in equity built up. They can either force the family to pay rediculous rent, or evict them. Now, the agency owns a home with some equity, for fairly little money (maybe 6 months of mortgage payments?). They can sell it below market value, and still come out with cash.
The family, then, is left with bad credit, no home, no equity (meaning no cash from selling the house), and no options.How do these fraudulent mortgage scams work?
A brilliant question, very interesting !
Well, as people cannot repay their loans yet they are working they are vulnerable to ';loan sharks'; sometimes they go by other names, like ';financial advisor'; or ';debt buster'; but in the end they lend at a higher interest rate or over a longer term, or both. Then there are ';other'; fees added to the loan like ';payment insurance'; or ';broker fees'; or ';higher lending charge'; and it is all ';sold'; as a way to ';keep a home for your family';. Infact the best option is to sell for the best price before the auction, or perhaps to declare bankruptcy and start again, because these loans can increase the interest rate and then lead to bancruptcy anyway. So to minimise costs and keep cash in your pocket, check into a motel until the economy recovers in a few years, with a democratic government and a lower dollar and more jobs with better pay.
Explaining how a scam works only benefits those wishing to scam others.
Basically simply get your mortgage from a reputable company, which you deal with IN PERSON and you won't have a problem.
What happened was a lot of the brokers and even the lenders PUT people into adjustable rate mortgages, which means the interest rates fluctuate. People that normally wouldn't have a snowballs chance in hell, were being pushed through on home loans. When the interest rates skyrocketed (in actuality it didn't but even a 1 or 2 percent change affects the monthly mortgage a lot), everyone that was barely meeting the mortgages back then got caught up in the higher payments and got in a lot of trouble.
People like to blame those that bought homes, but think about this way. If someone has NEVER bought a home before, and all of a sudden qualifies to buy one, do you really think they're going to a) know what to look for and b) care about how or why they qualified?
Hope that helps.
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