When faced with the prospect of losing a home, many people are willing to do whatever it takes to prevent foreclosure from happening. Unfortunately, this desperation can cause a person to fall victim to a foreclosure rescue scheme, which offers a way to put offer foreclosure to homeowners who can no longer keep up on mortgage payments. FreddicMac.com provides more information on these schemes so you can steer clear.
There are some basic elements that most rescue schemes have. A person identifying as a private investor claims that the homeowner can transfer the deed to them as collateral and that the investor will be able to secure new financing which makes the home more affordable. Once this new financing is in place, the homeowner will ostensibly privy to lower mortgage payments. The investor may also allow the homeowner to remain in the home and pay rent, until which time they can afford to repurchase it.
Once the scheme is said and done, the private investor takes all the proceeds and pockets them. A straw borrower may also be involved, and this person often receives some compensation for applying for a new mortgage on behalf of the property. The homeowner is left with nothing, however. Not only will they lose any equity in the home, they will also lose the home itself when they are evicted for non-payment of their mortgage. In other versions of the scheme, the investor will simply charge a service fee, with the claim that they will help with refinancing. This help never materializes, as the person simply takes the initial fee and cuts all contact with the homeowner.
You can protect yourself by knowing the signs of a possible foreclosure rescue scheme. The purchase of numerous rental properties at one time is typically a red flag, as is an inability to provide funds for the closing process. It’s also uncommon to buy a home to live in when the buyer already owns another home that is greater in value. Keep in mind that it can be difficult to identify fraud, so if you feel that something is out of place or an offer is too good to be true, it’s best to proceed with caution.