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There are a number of scams that can drive a homeowner into foreclosure. And once in foreclosure, there is one more scam that awaits you.
The bottom line is: before you sign anything, get advice from one of the agencies in the back of this booklet. Talk is cheap and costs you nothing, but if you take the wrong action or unknowingly sign the wrong paper it could cost you your home. Following is the most common scam on homeowners in foreclosure followed by scams involving real estate.
- Equity-Skimming Scam (Sale-Leaseback)
The equity-skimming scam starts when the homeowner is contacted by a private 'investor' who promises to help them out of foreclosure. The investor usually offers to payoff the loan if the homeowner gives him a deed to the house. The homeowner then leases the house back at a high interest rate for up to two years. Anytime during the two year period, the homeowner can buy the house back for the amount the investor paid to pay off the loan, plus a “gratuity” of thousands of dollars more.
If the homeowner misses just one payment, the investor can have them evicted since they are only tenants. Or, the homeowner cannot buy
the house back because they cannot get a loan for enough money to payoff the investor. In both cases, the homeowners situation goes
from bad to worse. As for the investor, he usually gets a new mortgage on the house and uses the money to scam another
unsuspecting homeowner out of his home. After the first homeowner is ultimately evicted the investor sells the house, pays off the
new loan and keeps the profit.
- Hello-Goodbye Scam
It is increasingly common for mortgages to be sold many times during the life of the loan. When this happens, both the old lender and the new lender must notify you of the change, in writing. The Hello-Goodbye Scam begins when you receive an official looking notice from a bogus company instructing you to send your future mortgage
payments to a new address. By the time you figure out that you were the victim of a scam, you may be three payments behind on your loan
and facing foreclosure.
- Home Improvement Fraud
Home improvement fraud is rampant. Both the Illinois Attorney General and the City of Chicago have taken many steps to curb the problem but it continues to persist because homeowners fail to seek advice before signing papers involving their house.
In the typical case, a home improvement company (“ builder”) solicits you to do work on your house. They prepare all the papers for you
to sign. After receiving the money, the builder does not do the work, or does not complete the work or he does a poor job. The paper that
you signed was a Mortgage which the builder sells to a mortgage company or a finance company which records it against your house.
If you do not pay the mortgage, the new mortgage company can foreclose your home.
A common example of home improvement fraud would be the following case which actually occurred: An older couple in the
inner city with a paid up house, received a knock on their door from a man who told them that they could increase their home's
value if they added a garage to it. The man prepared all the papers and drove the couple to his office to sign them. What they
unknowingly signed was a Mortgage which was recorded against their house. The builder received the money, sold the Mortgage
to another company, and then left town. Since the garage was not built, the couple did not pay the mortgage and a foreclosure
case was filed by the new mortgage company.
- Home Investment Fraud
With home investment fraud, you are told that you can make money in real estate with no money down and no payments. All you have to
do is agree to use your name and credit history to obtain a mortgage on a house. A real estate person or company owns the house.
Usually, it needs considerable repairs. The real estate company givesyou a deed to the house making you the owner and you sign a
Mortgage for much more than the house is worth. The real estate company receives the profit from the "sale.” They promise to make
all the mortgage payments and use the profit to quickly repair the house. After the repairs are complete, they promise to sell the house
again and pay you your fee. Instead, the real estate company keeps the profit, does not complete the repairs, changes its name, changes
its location and repeats this scam.
If you have certain characteristics, you are a target for home improvement fraud and home investment fraud. Common characteristics are, if you are older, a woman, single and if your house is paid for. Before you sign any papers, get advice from one of the agencies in the back of this booklet.
Don't be a victim. Get advice before you sign.
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