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Scams That Target Home Equity

If you have significant equity in your home, you are a prime target for the mortgage rescue scams aimed at getting ownership of your house away from you.

One common trick sounds especially good because the mortgage gets quickly reinstated, at least temporarily.

What you’ll hear: “We’ll buy your house right now—just temporarily, of course. We’ll make the mortgage payments. You can stay right where you are, lease the house from us, and buy the house back when the loan is paid off.”

What really happens: The foreclosure rescue company is confident that you won’t be able to buy the house back, especially if it involves a big balloon payment, which is common. Ultimately, you lose your home and are quickly evicted. Eviction comes quickly because you have only the status of a tenant under the lease or rental agreement that was supposed to be temporary. By contrast, if the house had gone through foreclosure, you would have had been able to stay there for months payment free as the foreclosure process went on.

Another scam involves wresting ownership away from the homeowner without the homeowner’s knowledge.

What you’ll hear: “We’ll get a workout with the lender. We’ll handle everything—just send your mortgage payments to us and we’ll pass them on to the lender.”

What really happens: The papers you sign actually transfer ownership to the company. (This can easily be accomplished because people expect legal documents to be full of gibberish they don’t understand, or don’t notice that the documents they sign have blank lines that can be filled in later with terms they never agreed to.) Instead of sending your mortgage payments to the lender, the scammer uses them to refinance the property. Then it sells the house to an innocent third party and disappears, leaving you without equity or a workout.