"Foreclosure Rescue Scams"

Posted by: Dean Foust on June 21, 2007

rescue2.gifHave been meaning to mention a story I authored in last week’s magazine about the rise in so-called “Foreclosure Rescue Scams,” in which unscrupulous individuals or groups approach homeowners facing foreclosure and promise to help them save their homes. In many instances, they convince the troubled homeowner—who is desperate to save their homes—to transfer the deed over to them with the promise that the investor will make the mortgage payments going forward, and the previous owner can rent while they try to rebuild their savings and repair their credit.

webuyhouses.JPGYou know how this ends: Once the supposed “angel investor” gets the deed to the house, they boot the former owner out—and sell the property for what’s often a hefty profit. Sometimes they comb through tax records for listings of homes whose owners are in default on their mortgage. In other instances, they market their services—using everything from billboards to those little hand-drawn “We Buy Houses” signs you see sticking out of the ground at intersections.

I mention the story because in the week since it appeared I’ve received emails from a few private investors who took me to task for the story. They claim that, in my zeal to take to task the growing number of “foreclosure rescue” scamsters, that I also tarred legitimate investors like themselves who, yes, buy homes from owners facing foreclosure, but try to help the previous owner salvage something from the deal.

But what? This is where I’m stuck. I’ve contacted a couple of the “foreclosure investors” who contacted me, and hope to get back to everyone, but when I ask, “So, give me the details of how one of these deals work,” they clam up. Don’t want to give away their secrets. I had this same problem when I was reporting out the original story.

So if you feel you were wronged, tell me: What are the normal terms of the deals you strike with these distressed homeowners? I’m all ears.

Reader Comments

Nishani Naidoo

June 25, 2007 8:35 AM

I am attorney practising primarily in New York City and Westchester County. I worked for a short while at a small law firm in Queens where I encountered one of these cases. The ENTIRE "rescue" operation was a scam. My client had inherited the home from his Mom. He took out a $150,000 mortgage to pay off his Mom's old loan. In this mortgage, he also took out enough money to make 15 months of payments. He gave his real estate broker this money to hold in escrow and make the monthly payments. The real estate broker DID NOT make the payments and the house went into foreclosure. So the real estate broker came up with a plan to save the house. He said that they would refinance again -- this time consolidating all of my client's debt (student loans, credit cards, etc.). They would then hold five (5) months of mortgage payments in escrow. If ALL of his payments were made on time for five months, his credit would improve and he could refinance again at that time at a loweer rate. My client went along with this. At the end of the five month period, however, he decided to use another broker for his refinancing since he did not want to deal with the old broker anymore. He was approved for a loan but when the new broker ran the title work for the closing, he found that the property had been "sold" to another person. My client then went to a non-profit organization called Jamaica Housing Improvement, Inc. (who, by the way, sees a TON of these cases) who referred him to the Foreclosure Prevention Unit of South Brooklyn Legal Servies (who also sees a TON of these) and Legal Aid in Queens. He was referred to us from there. When I dug through the records, I indeed found documents evidencing a "sale". We tried contacting one of the attorneys involved and they promised to transfer the deed back to my client. They did not ... instead, they sued to evict him from his home since he was a "tenant" and the house was owned by the "new owner". We filed a lawsuit against the real estate broker, the "buyer's attorney", the "seller's attorney", the bank attorney and the notary public who notarized all of these documents. It turned out that the "buyer's attorney" had been called in at the last minute to do the closing and did not even know the "buyer". The "seller's attorney" (my client was the "seller") had never met my client! He was also the owner of the mortgage company that did the new loan ... and the mortgage company was run by his friend the real estate broker (which shared the same office, phone number and staff as the mortgage company). Also, the notary public -- who was also the title closer -- was the father of the bank attorney. This is the essence of how these deals work. The entire HUD-1 settlement statement was a fraud. It shows a downpayment and money being paid to my client. This was completely false as there was no downpayment and no money paid to my client. The only money involved was the bank loan. (By the way, the HUD-1 also showed another mortgage brokerage company -- a reputable company -- as being involved; this company -- Novastar -- had absolutely no record of this transaction and never got paid either. Their name was just used on the HUD-1 to lend an air of legitimacy to the entire transaction; the actual payments were made to the mortgage company owned by my clients lawyer -- in other words, the bank attorney (who wrote out the checks) had to have known something was awry).

We not only filed a lawsuit, but reported all of this to the District Attorney, the Grievance Committee (for lawyers), the State Banking Department and the State Licensing Dept. This is when we discovered the bureacracy in all of this. The District Attorney did not know how to handle this. In fact, they just plain out did not respond to us for over a year and a half. The Grievance Committee said the mortgage broker was at fault; the Banking Dept. said the lawyers were at fault; but the Dept. of State did go after the real estate broker and are in the process of having his license removed. I eventually approached Eliot Spitzer about this -- when he was campaigning for governor -- and he gave me the number of the head of the criminal division at the AG's office. They bounced me around a few times and I wrote to every single person at the AG's office that I got bounced around to. I eventually went in and sat down with them and explained it all. I printed out a copy of this report (http://www.consumerlaw.org/news/ForeclosureReportFinal.pdf) for them. A week later, the Queens DA called and apologized for not having done anything sooner. My client took the files down to the Queens DA. I am not sure what, if anything, was done though.

Back to our case ... the judge was very sympathetic and wanted the attorneys and real estate broker to make my client whole. The amount invovled was about $150,000. The only issue -- the judge said -- was that they were going to pay $75K now and $75K when? He gave them two weeks to come up with the answer. When we came back in two weeks, two of the parties had fired their attorneys and hired new attorneys. A few weeks later, the judge told me -- in open court -- "these are my best friends, they are going to win". So we file another complaint -- this time with the judicial commission.

While all these governmental bodies are taking their time to investigate, we are forced to settle in court. We are asked to accept $77,000. My client would have to pray for a miracle to come through with that figure, and, in fact, it turned out that it was not enough. He could not qualify for a large enough mortgage to "buy" his house back and it was sold at auction earlier this year.

The investigations into the various parties continues. I am not privy to any information since these bodies do not tell you what they do. I was called to testify at two of these investigations, so I know that something was done as to at least two of the parties we complained against. I heard from another source that the grievance committee "censured" one of the attorneys involved (this was my client's "attorney" ... whom he had never met ... and who was also the owner of the mortgage brokerage business). I do not know what if anything happened to the other attorneys. I do know that they are all still practising law now though.

I have sent this link to the Foreclosure Prevention Unit and Oda Friedheim of Queens Legal Aid. Hopefully, they will contact you since they see hundreds of these cases (no exaggeration). I also sent this link to a few of the governmental authorities I have talked to. Hopefully one of them will contact you, although I doubt they will. I am hoping, though, that they will at least refer the complainants -- the people who filed complaints with them about these practices -- to you. The issue, though, is that most of these people are poor and they're often minorities. They may or may not have Internet access and are more than likely not the people you interact with on a daily basis. I also sincerly doubt that they are the people who read Business Week. This does not make what happens right. I am just saying all of this since I am hoping you understand why (a) you may not get as large a response as you are hoping for, and (b) when you do get a response, you understand that the people you are dealing with are more than likely not like you. If you are really, really interested, I would suggest you visit Jamaica Housing Improvement, Inc. or one of the local community organizations that deal with TONS of these cases. They don't have lawyers on staff so they don't know what to do. So a lot of times people end up losing their homes, and just disappear into the fray of life. So all I am saying is that you may not find out about all of this. However, that does not mean that it doesn't happen. I think the saddest part of all of this is that it destabilizes these communities, and the aftermath of that type of destabilization is something we will have to deal with for a very, very long time to come.

mike1981

June 26, 2007 9:18 AM

There is a body of case law that is at least a couple of centuries old (dating back to the English common law) that is referred to as the "Equitable Mortgage Doctrine."

This doctrine essentially says that if a financially strapped property owner obtains funds from, what I'll refer to as, a "money provider", whereby the property owner is required to sign over ownership of the property for a price that is significantly below fair market value, and, in exchange, is allowed to retain possesion of his/her property and given a right to repurchase title to the property in the future, a court of equity in many states will treat this transaction as a secured loan, or "equitable mortgage".

A recent Federal case in Michigan illustrates this concept. A brief summary of the case, titled "Court Clobbers Foreclosure Rescue Plan" can be read at this url address:

http://www.lipsonneilson.com/news/JulyOctober2006Newsletter.html#Court_Clobbers_Foreclosure_Rescue_Plan


-- The actual Federal Court Case itself, Moore v. Cycon, can be found here:

http://www.michbar.org/opinions/district/2006/081606/32990.pdf

-- In this case, the foreclosure rescue operator was forced to give back the home to the homeowner and, because the arrangement was treated as a loan, the court found that the foreclosure rescue operator violated the state usury law because his profit on the deal was treated as interest on a loan, and the interest exceeded the maximum interest allowable under the applicable state law. More and more attorneys around the country are bringing lawsuits against foreclosure rescue operators on this basis.

For more on the "Equitable Mortgage Doctrine" online, go to The Home Equity Theft Reporter Cases & Articles, at:

http://HomeEquityTheft-Cases-Articles.blogspot.com

Brian

June 28, 2007 5:06 PM

We did a deal like this a couple of years back. We weren't at risk of foreclosure, but we were trying to get out of house that wasn't selling. The deal we made was this: The company (that did a lot of foreclosure rescues) agreed to buy the house from us at a set price (the principal balance on the mortgage at the time we made the deal) in 3 years or less. During that time they rented the house out, made the mortgage payments, and collected all of the rents. They bought the house from us 2.5 years later and our profit was the reduction in principal that had taken place over the prior 2.5 years.

It was a very good deal for us, but we also weren't desperate.

CrediThinker

June 29, 2007 3:19 AM

I would perhaps agree to make such a deal but only if I felt really desperate and there were not any other way out. As a matter of fact, all suchlike companies, promising you wonderful quick rescue are self-profit and they are trying to rob you anyway. So, make sure they all are legitimate before you agree.

Kyle Armbruster

July 3, 2007 8:50 AM

I've invested in such a deal, as I have a family member who does it from time to time, as do some of his friends. Most of the people they deal with actively are trying to get out of the house and out from under the bank. Those who want to rent can negotiate terms. It's easiest for all involved if they get back on their feet and re-buy the house, but this doesn't often happen because these are people who don't qualify for any more mortgages (and probably shouldn't have been given one in the first place).

The reason people probably clam up is not that they are stealing people's houses, but because it takes some finagling and playing banks off of one another to make sure everyone gets what they want out of the deal. Banks hate it because they aren't given the chance to steal the house.

I can certainly see how it could be done really unfairly, but it most certainly doesn't have to be. In the case of the deal I was involved in, my family member was friends with the person in trouble.

In the case of a near foreclosure, these people are already losing their house. It's gone. If a "rescuer" acts ethically, what this does is give them some control over the situation and another chance. If he doesn't, that is condemnable, but in the end, the people are still losing their house. There's no accounting for jerks, and that is what you're dealing with if someone is running people off the property after saying they'd rent it to them.

LL

July 4, 2007 4:05 PM

Dean, are you saying no investor explained about the short sale or subject-to? It's no secret. You can google and find tons of info online.

I personally do not get involved in preforeclosures, but I know many "legitimate" investors who do. However, they do NOT lease the house back to the homeowner. Leasing back is the murky area often considered "fraud".
(Leasing back is a bad idea because the chance that the distressed homeowner can pay the rent is slim.)

A short sale is where an investor negotiates with the lender on behalf of the homeowner to have the outstanding loan discounted. This is where equity can be created. Once the investor and the lender agree to the price, the investor sells the house to a buyer and s/he profits from the difference between the purchase price and the sale price. The homeowner is saved from the foreclosure, which would have kept him/her from getting another mortgage for 7 years.

The negotiation with the lender takes from weeks to months and the success rate is not high (I hear 50%) because many lenders, notoriously Countrywide, do not discount the loans and choose to foreclose.

Journalists and politicians, who don't really
understand the process, like to rant, "We need to let the homeowners to keep the house."
What is there to keep? What is there to steal?


Most of these homeowners who took out the loans over the last few years put down hardly anything (0-5%) and they are UPSIDE DOWN now. They have NO EQUITY--there's NOTHING to steal!!! That's why the equity needs to be "created" by negotiating with the lender. These homeowners NEVER owned the house--they were simply "renting" from the lenders.

So who is stealing what from whom?
The lenders who are keeping the homeowner's down
payment (if any)?
Or the brokers/lenders who pocketed various fees
when they made the loan to the homeowner who couldn't afford it anyway?
Or the homeowners who aren't paying back what they owe?

Mike Mueller

July 11, 2007 4:15 PM

Here's just the latest two:

A very nice lady called me looking for help. She is a full time RN and a year away from retiring. She had bought a couple of properties over the years.
A loan officer convinced her to refinance all of them into Payment Option ARMS - all of them!
She was recasting now, and all of her payments had almost tripled.
She was NOD on a couple of loans already.
Nothing I could do. She's trying to short sell all right now. But in the end, this was her retirement.
Now she has nothing.

A Realtor friend of mine came to me.
She had a client who had bought a small ranch 10 yrs ago.
Two years ago he refinanced. Then he got into trouble.
He still had plenty of equity, but a scammer got to him.
In doing a refi, they told him his credit wasn't so good.
They had a solution, they would bring in a "nice lady" who had great credit.
He signed away his Deed of Trust.
A couple months after the "refi", a For Sale sign went up in front of his home.
That's when he found out he was no longer the owner and when the home sells the nice lady will be keeping the close to 1 million in equity.
I did some digging and found out the nice lady is a local Realtor!

Melissa Huelsman

July 11, 2007 10:05 PM

As one of the attorneys mentioned in the article and someone who has been handling these cases for a few years now on behalf of homeowners who are scammed, I can tell you why the "legitimate investors" won't tell you about their deals - because they don't have any "legitimate" deals. If they buy the house outright at a price that is somewhat discounted from the actual value and the homeowner walks away with some cash and understand what is happening, that's ok. In fact, so long as everyone understands the deal, that's ok too. What myself and consumer attorneys and those government types are talking about is fraud and deception, and if homeowners are deceived about the transactions' terms, then it is fraud and theft of their equity. Go read the definition of fraud. It fits these schemes precisely. And the definition of "fraud" does not include a lease back option as being per se fraudulent. However, a lease back option in a real estate transaction where the homeowner is unrepresented and the entire transaction is structured and coordinated by a "rescuer" and his cohorts who are all working together for their own benefit and not that of the homeowner is usually an indication that a fraud is taking place because the rescuer and his/her cohorts are deceiving the homeowner and not telling them or showing them the correct documentation reflecting the true terms of the deal, and that is a fraud.

To "LL" who describes "creating equity" - what he is describing is also called fraud and the victim is the bank or company or trust who owns the note and the loan. A LEGITIMATE short sale occurs when the house isn't worth enough to sell it and pay the mortgages because it is overencumbered. In those circumstances, sometimes the lender will negotiate with the homeowner to allow the sale at less than the money that is owed because the property value is less than the debt. However, when someone contacts the lender and lies to them and convinces them that the house is worth less than its true value so that that person - not the homeowner - can buy it for less than its value only to turn around and sell it to someone else - that is fraud upon the lender. Now, I sue lenders all the time, but I also do not endorse fraud under any circumstances and it is NOT ok to defraud lenders.

I assume when "LL" uses the phrase "subject to" he means when a purported buyer buys a house from a homeowner and purports to take the property "subject to" the homeowners' existing loan. Well, first of all, unless the buyer is paying off the existing liens, there is no question whether the documents say so or not that the transaction is "subject to" the existing liens. Sale or transfer of the property does not change lien status. Second, since virtually all home mortgage loans (whether first or second position loans) made in America in the last 5 years are NOT assumable. That means that there is very plain language in the deed of trust (which documents that the loan is secured by the real property) which says that if the homeowner sells or transfers the property without the consent of the lender, the loan is accelerated and becomes due and payable in full. The only way a "buyer" can take the property "subject to" the existing loans LEGALLY is with permission from the lender, which does not occur. So, again, what "LL" is describing is simply yet another way of deceiving and defrauding the lender in order to create a financial benefit for the rescuer. This of course also means that the former homeowner will be liable to the lender for this violation of the terms of the deed of trust and will likely face foreclosure again simply because they have transferred or sold the property. Google these terms all you want. Just because yet another real estate, get rich quick guru tells you it's ok, doesn't mean that it is. And if some of you are so concerned about a homeowner paying back what they borrowed, why are you so willing to negotiate a transaction whereby neither the homeowner nor anyone else pays the lender what is owed and instead works to have that money transferred to the rescuer?

What everyone is also ignoring here is that if the property is worth more than the amount owed to the lenders and any other lienholders, then the price will more than likely be bid up at the foreclosure auction. In general, the prices bid at foreclosure sale auctions are usually about 80% of the fair market value of the property. Any monies left over after the lenders, lienholders and the trustees/attorneys conducting the sale have been paid are then deposited in the court registry and the former homeowner can recover that money. Therefore, even if the foreclosure happens, the homeowner might still be able to recover significant amounts of money.

There very well may be people out there who do these deals "honestly". However, they are very few and very far between, and they certainly are not operating a business doing these deals "honestly". They cannot make the huge profits that they desire by conducting "foreclosure rescues" honestly. I will join in Dean's request for people to contact him or I who are conducting this business "honestly" to show us how it works. I would LOVE you to show me satisfied customers who got their house back at a reasonable price that they could afford. PLEASE! And you can also explain to me the following: (1) how the former homeowners' credit gets "cleaned up" by paying rent for a year or two; (2) how the former homeowner is going to be able to afford to get a purchase money mortgage loan (not a refi) in a couple of years in an amount that is significantly more than what they owed previously because the "rescuer" needs their massive profit (and there will be costs to obtain the loan, for closing costs, etc. and because they usually have to pay all of the closing costs and taxes for the "rescuer"); (3) how the former homeowners were able to keep up necessary repairs on the house during the years they were "renting" (because the rescuers always require that their "tenants" make repairs in violation of landlord tenant laws); and (4) how the former homeowners are going to pay "rent" that is the same as or more than the previous mortgage payments that they could not afford. These are just a few of my questions but I wait to be enlightened by all of those do-gooders out there who are saving people's homes and asking for very little in return.

LYNETTE

July 20, 2007 12:47 PM

I WAS SCAMMED BY A RESCUE COMPANY I RECIEVED A FLYER IN THE MAIL AND DESPERATE I CALLED. I PAID OVER 1700.00 UP FRONT THE COMPANY LIED TO ME THE WHOLE TIME TOLD ME THEY WERE WORKING ON A LOAN MODIFICATION. AFTER ALMOST A YEAR OF BEING LIED TO I CALLED MY MORTGAGE COMPANY MY SELF AND SAVED MY HOME. THEY REFUSE TO REFUND ME MY MONEY. I CONTACTED THE BBB THEY WERE NO HELP AND THE ATTORNEY GENERAL. DURING THIS TIME THAT THE COMPANY LIED TO ME MY FORECLOSURE FEES, LAWYER FEES TRIPLED. I ENDED UP ADDEDDING ALMOST 30000 TO MY HOME LOAN. I WOULD RECOMMENED TO ALL NEVER CALL THESE COMPANIES. THEY WILL TAKE YOUR MONEY AND THEN DO NOTHING FOR YOU THEN THEY DONT EVEN GET A SLAP ON THE WRIST

Joe Hagan

July 20, 2007 2:51 PM

There are dishonest journalists, attorneys, real estate investors - you name it - who deserve to be in jail. And there are honest journalists, attorneys, real estate investors - you name it - who better our world everyday.

The issue is not in the activity but in the human condition. To paint the process of rescuing people from a foreclosure situation with a single brushstroke - in either direction - is naive ... or perhaps intentional on some parts.

That said ... I personally know a real estate investor who's ethically and compassionately helped many people out of foreclosure situations. In one case, in addition to what he was able to pay for the home, he paid the sellers' first 6 months rent in an apartment to help them get back on their feet.

Turn your head. There are good people and bad people all around you. It's the people. Not the business they're involved in.

judy basso

August 13, 2007 5:51 PM

I am a victim of equity theft i also sign my deed over and with a fee of 50,000 to the angel investor and was told i could get my house back in one year now i cant and willing to sell but they want not only their 50,000 but 50% of what is made on the sale I have no where to turn told they own my house and i cant do anything need advise and help 845-642-6339

RealBritFL

August 13, 2007 10:34 PM

Anyone facing foreclosure should be aware that there is one very important alternative to avoid the foreclosure and that is the Short Sale. A Short Sale is a proven way for a homeowner who owes more than the house is worth to avoid a foreclosure and the subsequent credit hit.

I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations.

The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the lender can be anywhere in the country and certainly not aware of local real estate conditions.

If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.

The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult financial situation they can be avoided - an accountant should certainly be involved in that question. This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.

It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own and that would negatively impact their ability to make more loans.

CreditInvestor

October 17, 2007 3:15 AM

Some of these "foreclosure rescuers" recruit third-party individuals as "credit investors" or "straw buyers." They are told that they will be paid a fixed amount, most likely from the equity stripped from the homeowner in default, in exchange for allowing the rescuer to obtain a new mortgage under the investor's name (and based on his/her credit) and entering into a lease-buyback agreement as the optionor. They are told the rent will subsidize the investor's mortgage payments but more often than not in these cases, the tenant-buyers cannot make the rent so the investor is stuck with the mortgage of a property they do have control over. Now the credit investor is filing a summary process to evict the tenants for nonpayment.

What rights do these credit/straw investors have under these circumstances? Are they as much a victim to the "rescue scam" as the original homeowners themselves?

Here's a classic case of this: http://www.miamiherald.com/457/v-print/story/215473.html

Scott

October 17, 2007 8:24 PM

I get a little bit angry when I read these articles. I am an investor and what I do and what I have done for almost 15 years is exactly what is all of the sudden being refered to as a scam. I currently have 72 houses. I spend a fortune every month to pay the mortgages while i wait for my tenants (previous Homeowners) to pay the rent (always late) If this is such a scam i must be doing it wrong because according to all of these articles I should be running away with millions of dollars. Also there is an organization that i belong to called the Foreclosure Council Of America. TheFCofA.org. the organize ethical investors and screen them and have a strict code of ethics they must abide by. I think all ethical investors should belong to this group.

John

October 30, 2007 11:11 PM

The Foreclosure Council of America, is a scam itself. Scamming investors out of money to a company that's just looking to make some money off investors. They give homeowners a false sense of confidence. Just because you pay a fee doesn't make you ethical. Go with your guy when you are trying to stop foreclosure, or sell your house fast. Don't just go with someone who says they are ethical. Realtors pay for that title, it doesn't mean they are any better than a real estate agent. I confronted TheFCofA.org group about an investor who's house they "own" is now in foreclosure, and they evicted the former owner. Ethics? You own a house on someone elses credit and let it go to foreclosure? Am I missing something here.. Like they say BUYER BEWARE.

Laura Stan

April 25, 2008 5:57 PM

Tip of the iceberg, my friends. I went to my state Attorney General's Office in Mass., Martha Coakley, who touted herself as "doing something" about foreclosure scams. This was in Oct. of 2007. I have not heard one word or received any help, despite numerous calls.
My scam involved the buy-back, rebuilding your credit nonsense. I found out one of the investors was a disbarred attorney with a lengthy record of ripping off his clients. These people have no shame or conscience. At the time I was scammed I owed $76,000. on a house worth $219,000. I was in bankruptcy when I was approached by a mortgage broker who assured me she had a loan commitment. Surprise, no loan and then when it was too late she referred me to the scammers. Now the scammers are trying to evict me. I am trying to find an attorney to help me deal with this, but none of the ones I talked to seem to know what to do. I am researching the matter myself; I went to a legitimate bank and they told me that any legitimate lender wants to see people 3 years out of bankruptcy. The scammers did not report my rental payments to any credit bureau, as they had promised, to "re-build my credit." These people know fully well that you are not going to be able to buy your house back.
I am giving them one hell of a run for their money. I consider myself an intelligent person, yet anyone can be victimized by these schemes when they are pressured and told that if they don't go through with the deal they will lose their home and not get any money. These people will try to get in your head and appear so sympathetic. That's all part of the con.

3rdParty

June 2, 2008 10:49 PM

I, too, was involved in a foreclosure rescue leaseback program. I was the 3rd party investor, who gave the mortgage lender (foreclosure rescuer) my good credit to obtain a loan to pay off the owner's loan in default. I was of course paid a fee, which basically came out my own mortgage loan, for which I was responsible! As one would expect, the previous owner (now "renter") could not pay the rent and subsequently I went into a summary process to evict him (still ongoing).

If this was a scam, then I am just as a victim as the previous owner as I am the one stuck with a mortgage which is now in itself in foreclosure. But all the terms were laid out on paper at closing AND a real estate attorney looked over everything to make sure all parties were getting into a legitimate deal. We even had 3 days to back out if we chose to do so. The leaseback price was for the same price I paid for and the seller knew exactly how much rent was to be paid each month (which equaled my mortgage payment). Of course, there was a risk of him not being able to pay rent but the seller knew exactly what he was getting into and he got to stay in his home!

Hindsight is always 20/20 but I'm not sure where the "scam" lies. It was just a risky deal for both parties.

Pay your rent

August 7, 2008 6:46 PM

It boogles my mind that these people want to act like victims. I am sure that you were fully disclosed as to how the leaseback program works...Which is if you do not pay your rent you will be evicted, just like if you do not pay your mortgage your bank/lender will foreclose on the property. Unless you own a property 100% without a mortgage or lien it is not your house until you make the payments to pay off what you owe. therefore you will always be at risk of losing the home/eviction/foreclosure if you do not pay your monthly rent or mortgage obligation.

I am sure that this program was probably your last chance at keeping the same roof over your head, however by not keeping up with your payment it proved unaffordable. My best advice for you is to downsize and stop living above your means, or looking for a handout by suing a company that allowed you to keep up your style of living a little bit longer.

carlyn Mccabe

September 19, 2008 12:00 AM

In a legitiamte lease buy back program,
the seller is suppose to get someting for the home he just sold. The buyer is not suppose to skip away with the equity!! I was involved in such a scam.
The buyer made a profit of 150,000 on the sale of my home,Gave me 20,000
and charged me rent of 2900.
I undrestand the Buyer should make a profit but not 130,000 a legitimate lease buy backs usually charge the minimum rent,so the seller can afford to purchase back their home ,after all the buyer just got 130,000 !
Why do you have to pay 3000 a month rent.

I was promised additional funds and told an escrow account was being set up for me.
It never happened,all of the loan officers ,brokers who negotiated the deal no longer work for the company.

yOU HAVE TO BE REAL CAREFUL WITH THESE LEASE BUY BACKS ,THEY SAY ANYTHING TO GET YOU TO SIGN ONCE THE CLOSING DAY ARRIVES IT ALL CHANGES.

carlyn mccabe

January 8, 2009 3:19 AM

regarding lease buy backs,there are some very honest people out there,unfortunately there are others that are very dishonest,for example they buy your home out of foreclsoure and tell you your rent will be 2,000
for 1 year,you will get a cash out of 30,000 and six months of escrow will be set aside for any unexpected hardships.

A big surprise comes at closing ,the rent is 2900 instead of 2000. The invsetor tells you not to worry you have so much escrow set aside and the cash out on your home will be 30,000 and you can use that escrow that was set aside.

Than the investor tell you that the loan officer that took you to closing demanded a high commission and they can only give you 20,000 on a home they just made a profit of 150,000.
when you run out of money because you are paying 2900 a month rent and ask if you can use that escrow ,they tell you that the escrow is in case they have to take you to court and you cannot use the escrow.

Than they send a summons to evict you.
The summons states that they never acquired the property and they never gave you an option to buy.

I ask you is this fair???? Not only did you give them your home ,you also paid them 2900 a month rent,for a house that had a mortgage of payment of 2000 a month.
The mortgage on my home was 170,000 ,my home was sold for 355,000.
This comapany stole my equity,took 2900 a month rent from me.
I have been paying water and sewerage on this home,and now they want to evict me.

do you think this is fair???? This is what these predatory schemers are doing to hardworking americans that came into financial hardships ,I had 2 unexpected deaths in my family,I beleived them. I was not trying to live above my maeans.

If they had charged the rent of 2000 a month,gave the proper cash out and not stolen my equity ,i could have been a home owner again,now I am facing eviction,they got my house,2900 rent and 150,000 in equity. this is fair?????

Carlyn Mccabe

February 1, 2010 4:37 AM

I am letting all of you know that I along with many others have been totally scammed by Demarco rei,My or should I say the home that was mine and belongs to a straw buyer is now in foreclosure,he has notified that he is now broke and will sell the property back to me.This house was stripped of its equity,though the closing doscs stated I was getting 150,191.00 I received 20,000 with a promise of reseves and a down payment set aside.The title company is now closed along DeMarco rei.
The attorney representing me ,advised me maybe I should buy the property back from the straw buyer,and ironically enough i was contacted by this attorney and he said if I helped his client the loan officer who got me in this mess,the loan officer would represent me in a whisle blower case against DeMarco rei.
The loan officer has been compensted and now I was told to talk to the straw buyer and make a deal.
I would not be in this position if the investor charged a rent within reason and let me use the equity ,instead he charged me 2900 rent ,kept the rest of the equity.I am now on the verge of losing my home.
It would be nice if the investors meant what they said in these scams, 9 out of 10 are scams.
I am sure many are thinking thi sis my fault,but Demarco rei has done this to so many and there are many lawsuits filed against him.
The fair thing in my opinion should be
just as the banks were "BAILED out"
Crooks like Demarco rei,should be made to give us a refinace or at least the cash back so we can be homeowners again,not only did they take our homes
they got rent,large rent in many cases.
Why should we lose our homes.
I am so disgraced and embarassesd I am 57 years old and about to lose my home.
I hope the Government does something about these criminals and their treacherous Scams.
I urge anyone reading this to learn a lesson if you are in preforeclsoure please make sure you contact your lender ,call hud ,call fha there are all kinds of hotlines out there do not let this happpen to you.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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