I don’t know where to start, this story is so typical of ripping off desperate homeowners thanks to many “get rich through short sales” seminars and those practicing what they were preached. In this case, congratulations to the fraudster – he pocketed $60,000 with no investment! – But now he has a real risk of going to jail.
Mrs. Smith, a Haitian that speaks little English, was current with her mortgage but having problems making ends meet. The mortgage amount was greater than the value of the home (the home was upside down) and after hearing and reading about mortgage modification and save my home alternatives through the “O’Bama programs”, she was interested in finding out what help might be available to her.
She called her lender and as most say, “we cannot help you unless you are (30, 60, 90 days – pick one) late on your mortgage with us”. (The fact that this is usually an incorrect or misleading statement is another matter and mentioned in my article SHORT SALE SUMMIT REVELATIONS BY BANK OF AMERICA). Since her lender told her to be late, she stopped paying the mortgage.
After a few months and her lender now telling her she is in default of the mortgage for not paying it and foreclosed. She panicked. After hearing a radio program about “saving your home”, she called the number of the sponsor (actually a talk radio program host who is a mortgage broker) and set up an appointment to meet him.
In her living room, the talk show host listened to her story and told her not to worry – he will be her “savior”. He said he can conduct a “short sale” so that the property will be sold to her adult son (who is living with her) at a greatly reduced amount than the mortgage. (As a result of how the names are handled in Haiti, her son’s surname appears different than her surname.) She and her son would continue to live in the house with the son the new owner. In the meantime he would handle the negotiations with her lender and she and the son would continue to live in the house.
To accomplish this “short sale” the savior accomplished at his request the following:
1. from the mother, obtained for no consideration, a deed for the property to his corporation
2. had the son enter into a lease with the corporation for the house he was already living in at a monthly rent of $1,500
3. had the son enter into an option to purchase the house via a document that looks a lot like an installment sale agreement, but with a contingency that accomplishing the sale all depended on the corporation getting a short sale done with the lender. No mention of the previous owner is in the documents nor whose mortgage must be shorted. For this option the son paid the corporation $21,000, which amount would be credited to the purchase price when and if the sale went through.
The lease has been going on for 2 years and all the rent paid on time. The savior has had the son make a loan application for the eventual loan to purchase the short sale. So far the investment by the savior / corporation is zero and the profit is $57,000.
There are so many things wrong with this story that it makes me dizzy. For example,
1. the FTC mortgage rescue rule is grossly violated
2. the Florida mortgage rescue rule is grossly violated to criminal proportions
3. the lenders have a prohibition on non-arms length transactions and this is a clear fraud to circumvent this rule. Violation of the rule is bank fraud.
4. the deed to the corporation was obtained under false pretenses, as the transaction being illegal, cannot be valid.
5. the option monies were thus obtained illegally, as well as the continuing rent monies.
6. the corporation / savior have done nothing to forward the short sale (even if it could legitimately could be done, and have not obtained an attorney to represent the mother in the foreclosure action.
The benefit to the savior and his corporation is that he “acquired” the real estate fraudulently and for free; he got $21,000 for the option contract to sell a house he really does not own and to a person that really cannot buy it; he has been renting the home to the owner under the false pretense that it is necessary to qualify him for the short sale purchase; he failed to advise the owner what was happening and that she was still liable on the mortgage.
This is a blatant example of what some “get rich quick” short sale courses are offering and how they can seem so easy and so fast to make money without any money down. Well in this case it did work – but the cost to the “savior” is not going to be covered by a refund of the seminar cost. Eveyone must be on guard for fraudster deals – if it has guarantees or is too good to be true,…. guess what?
For those that are going to say "Go to the police!" - they went, but all that happened was a filed report. Getting these things escalated in law enforcement is not a top priority.
(Note: names, amounts and certain details are changed to protect the parties as this is an ongoing litigation matter)
For reference on this situation, see the following articles:
Copyright 2011 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.
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