People in Long Island who have fallen behind on their mortgage payments may be desperate to find a way to avoid foreclosure. For some, trying to sell their home is their preferred option. However, they need to look out for scammers presenting them with deals that are simply too good to be true.
One scam is equity skimming. In equity skimming, a “buyer” will offer to pay off the homeowner’s mortgage once the home is sold, or offer the homeowner a lump sum of money once the sale goes through. The buyer will try to encourage the homeowner to deed the home to the buyer. However, after that the buyer will not pay the mortgage and will eventually allow the home to be foreclosed upon. This is possible because even if the deed to the home is signed over to someone else, the original homeowner is still responsible for mortgage payments.
In a similar scam, a homeowner who is facing foreclosure may be approached by a “lender” who claims he or she will obtain new financing for the home. However, the lender will insist that the homeowner deed the home to him or her. However, the refinancing that the lender guaranteed never comes. Moreover, the lender may even borrow against the home and might even sell it to another party, the proceeds of which will not go to the original homeowner. The original homeowner is treated as a tenant, and may be evicted if he or she falls behind on payments.
A third scam to look out for is known as the balloon payment. In this scam, a lender will propose that in lieu of foreclosure, he or she will refinance the homeowner’s mortgage and therefore reduce the homeowner’s monthly mortgage payments. This is made possible by having the homeowner only repay interest with his or her monthly payments. However, once the refinanced loan term ends, the principal left on the loan term is due entirely at once (which is known as a balloon payment.) If the homeowner cannot pay this lump sum, he or she could have their home foreclosed upon.
As this shows, while homeowners who are in financial trouble and have missed mortgage payments may be desperate for a solution, they need to tread carefully, and be sure to avoid scams. There are other legal solutions for avoiding foreclosure, including filing for bankruptcy.
Source: FindLaw, “Watch Out for Foreclosure Scams,” Accessed Oct. 31, 2016