If you have financial problems and struggle to make your mortgage payments, you may start to receive offers from buyers that seem too good to be true. Beware, because they just may be.
Unfortunately, there are people out there who prey on financially strapped individuals with promises of quick and easy fixes that allow them to keep their homes. These “fixes” typically yield the same result: The homeowner loses both money and his or her home while the scam artist legally obtains the home without having to pay a dime for it. To help you avoid this type of financial devastation, FindLaw explains the most popular foreclosure scams.
The balloon payment
The balloon payment is a scam in which a so-called lender offers to save you from foreclosure by lowering your monthly payments through refinancing. Review the terms of any contract that promises to do this, as chances are good that the lender is offering you a loan on which you pay the interest only. At the end of the loan term, you still have to repay the entire amount you borrowed. If you cannot do so in one lump payment — otherwise known as a “balloon payment” — or through refinancing, you lose your home.
Equity skimming
In this scam, a “buyer” promises to get you out of financial trouble by either paying off your mortgage or giving you a large sum of money once your home sells. However, you must first move out of your home and deed the property over to the buyer. The buyer then rents out the property for a bit, collects rent but never makes payments toward your mortgage. Eventually, the bank forecloses on your home while the buyer walks away richer than when he or she entered the agreement.
Signing over your deed
If foreclosure is imminent, you may receive contact from another “lender” who offers to help you with financing. To do so, however, he or she will need the deed to your property—a measure, he or she explains, that will prevent your bank from taking your home. Once you deed the property over, the financing never comes through. However, the lender has the deed to your home and begins to treat it as his or her own. He or she may borrow against it or even sell it, neither of which you can prevent. If the lender does allow you to remain in your home, you must pay rent. If you do not, the lender has the legal right to evict you.