What is a foreclosure rescue scheme?

Being behind on your mortgage payments can put you in a desperate situation. Sadly, there are people out there in Santa Cruz you are willing to take advantage of that desperation for their one fraudulent purposes. People facing the prospect of losing their homes will often do anything to try and keep them, including exposing themselves to massive financial risks. One of the more common schemes that puts homeowners at risk are foreclosure rescue plans. 

The American Bar Association defines a foreclosure rescue scheme as a ploy initiated by one claiming to be able to help homeowners stop a foreclosure. The basic idea behind it is this: You transfer the title of the home over to the “investor,” with the promise that you can remain in it (while paying rent) and then buy it back at a later date. From there, the scheme can go a number of different ways:

  • The “investor” charges you inordinate amounts of rent or offers a buyback price that is well above market value.
  • The “investor” cashes out your equity while still charging you rent, and then allows it go into foreclosure.
  • The “investor” sets you up with a straw borrower (usually another participant in the scheme), who pays off your loan through another arranged through fraudulent means. You deed the home to the straw borrower, who gets paid for his or her role and then defaults on the new loan. The “investor” pockets your equity and vanishes, while you are evicted. 

Being vigilant will help you avoid foreclosure rescue schemers. Avoid deals where an investor talks about letting you rent after a title transfer, where he or she claims to be purchasing several homes in your area, or where he or she is unable to contribute any funds to close. 

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