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Avoid Mortgage Foreclosure Scams: How the Lease Back/Rent-to-Buy Home Foreclosure Scam Works

Updated on January 20, 2010

Advice on How to Stop Mortgage Foreclosure Scams

When disaster strikes, criminals are not far behind. And, the home foreclosure crisis that started in the fall of 2007 has resulted in a plethora of mortgage foreclosure scams. On the one hand, you have homeowners who are desperate to save their homes. They have little to no knowledge about how the home foreclosure process and real estate laws work.

Couple this with skilled scam artists out to make a quick buck, and what you have is a perfect storm of factors that lead to some pretty fancy mortgage foreclosure scams. One of the most popular of these is called the “lease back/rent-to-buy” home foreclosure scam. Here’s how it works.

In this scam, what happens is the homeowner is asked to transfer the title of their home to the scammer. If you’re thinking, “Why would anybody fall for this?” Wait. Read on.

The scammer tells the homeowner that they will allow them to stay in their home – and even sell it back to them. Remember, they’re preying on the homeowners overriding desire to keep their home and avoid mortgage foreclosure.

So, the scammer tells the homeowner that if they sign over the title to them, they [the scammers] will get their home loan refinanced into a supposedly lower rate with lower monthly payments. Then, the homeowner can pay them [the scammers] rent until they can get back on their feet and get their credit in good enough shape to be able to get a home loan to purchase the home back.

The homeowner is told that they aren’t able to comply with the terms of the rent-to-buy agreement, which oftentimes includes upfront fees (discussed below), that they may face eviction.

Why the Lease Back/Rent-to-Buy Home Foreclosure “Agreement” Is Hard to Comply With

The scam has another component – which seems to take double advantage of the homeowner. What is it? Upfront fees. For example, it may require a homeowner to pay ridiculously high monthly payments that they can’t possibly afford. Hence, even if a homeowner wanted to comply with the agreement, they couldn’t.

So in addition to taking a homeowners home, they get upfront money the homeowner could likely put to better use, as well.

The Ultimate Goal of the Lease Back/Rent-to-Buy Mortgage Foreclosure Scam

The end goal is to get your home. You see, once you sign over title to someone, they can do as they please with the property – sell it, refinance it, tear it down, lease it to someone else, etc.

For the most part, the scammers in these situations never have any intention of ever selling you your home back. They don’t care about helping you avoid mortgage foreclosure. They simply want your house and any quick, upfront money they can get from you.

Why This Mortgage Foreclosure Scam Is So Appealing to Many Homeowners Facing Foreclosure

In spite of this, this type of agreement seems like a win win for the homeowner because they: (i) ostensibly avoid mortgage foreclosure; (ii) get to buy time to get their credit back in order; and (iii) still get to live in their home and one day even own it again.

Sobering Advice: One Fact to Keep in Mind about This Mortgage Foreclosure Scam

Keep in mind that even if you transfer the title of your home to someone else, you are still responsible for repaying the loan. YOU signed the papers; it is still YOUR mortgage debt.

The only thing you get rid of when you sign over your title is . . . your house. The debt remains and the bank can still foreclose. But, they’re not going to go after the person whose name is on the title; they’re going to come after you – the person whose name is on the home loan papers.

Remember, it’s your credit and your financial future at stake. Don’t fall for this mortgage foreclosure scam.

Learn more about how to avoid mortgage foreclosure scams and if you're the victim of any type of real estate scam, consult a foreclosure lawyer.

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