Foreclosure prevention scams: It’s easy to get sucked in

The front page of the New York Times (3/8/09) has a classic story of a foreclosure prevention scam.  It shows how easy it is to get sucked into these things.

The victim in this case was a woman in Brooklyn who had worked all her life for the city, adopted four foster kids and now, in retirement, fell behind on the mortgage payments on the house she had bought in 1996.  Rather than talk to her lender or get debt counseling help from Consumer Credit Counseling, she accepted advice from her neighbor and friend to go to a company called Homesaver.

What her neighbor did not tell her was that she was being paid an $8,000 finders’ fee for introducing Homesaver to a new victim.

The deal was supposed to go down like this:  Using a “sponsor,” Homesaver would increase the mortgage enough to pay the monthly payments until the victim, Mrs. Brickhouse, could resume making them herself.   Then they would take a small fee and turn the house back over to Mrs. Brickhouse.

What actually happened was that Homesaver arranged for a straw to buy the house, and pay off the old mortgage ($213,000) with one that was $130,000 more!  Homesaver took the extra money.

Mrs Brickhouse went to the closing not knowing what was going to happen, and before she knew it, she no longer owned her house.

Normally what happens next is that the foreclosure prevention scam artists simply default on the mortgage, setting up a foreclosure on the former owner of the house, who usually does not know they are just a tenant.

This time the woman who was the straw for Homesaver felt guilty and returned the deed to Mrs. Brickhouse.  BUT, the bank that issued the new mortgage for almost $350,000, wants to be paid, and there is no way Mrs. Brickhouse can make those payments.

She has found someone to help her and they are fighting to prove that the sale was fraudulent and contracts reached by fraud are not enforceable.

It reminds me of something my former sister in law used to say to me: “If you can’t kick someone when they are down, when can you kick them?”

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