SHORT SALE RESCUE FRAUD ON DESPERATE HOMEOWNERS

By
Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY
https://activerain.com/droplet/mN2

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:

I HAVE TO STOP PAYING MY MORTGAGE TO GET THE LENDER TO TALK TO ME

WHY IS THE BANK FORECLOSING IF I AM DOING A SHORT SALE (OR LOAN MODIFICATION)?

SHORT SALE PRIMER - LAWYER DISCUSSION OF THE SHORT SALE EVOLUTION

MORTGAGE FRAUD and SELLER FRAUD = WE PAY THE BILL

FORECLOSURE RESCUE AND MORTGAGE MODIFICATION FRAUD - ALERT ISSUED

THE FTC AND MARS - ARE REAL ESTATE AGENTS INVOLVED?

FLORIDA FORECLOSURE FRAUD BILL - UPDATE

-------------------------------------------------------------

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.

See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

 

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 11/13/2011 11:46 PM
  2. Charles Stallions 10/03/2012 12:25 PM
Topic:
ActiveRain Community
Location:
Florida
Groups:
Keller Williams 'Rainers
Florida Realtor® Network
Short Sale REALTORS®
PALM BEACH COUNTY SHORT SALES
Short Sale and Loan Modification Nightmares
Tags:
short sale attorney
short sale lawyer
palm beach short sales
florida short sale attorney
short sale fraud
mortgage modification lawyer

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Rainmaker
4,432,217
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

NAR and HUD and banks should do more to educate the consumers about these fraudulent schemes. I am glad this post is featured. I hope consumers will read it.

Nov 09, 2011 11:42 PM #27
Rainer
149,141
Judi Monday
RE/MAX Valley Properties - Green Valley, AZ
CRS-Green Valley AZ Expert, Green Valley Arizona R

Break my heart that there are people who prey on those in trouble.

Nov 10, 2011 02:32 AM #28
Rainmaker
820,770
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Richard, I've heard similar horror stories over and over and OVER.  It makes me so mad there are such predators out there.  Where are the feds in all of this?  Oh, I know - on one of their 18 weeks of vacation!!!!  Great story - let's hope it helps even one more unsuspecting but desparate homeowner. 

Nov 10, 2011 03:00 AM #29
Rainmaker
123,176
Kent Dills
Broker, Dills Real Estate - Bellingham, WA
Real Estate 817-495-8028, Bellingham, Washington

The seller is basically naive/ignorant and probably shouldn't be punished; but, the lender should lose his/her loan officer/mortgage broker license.

Nov 10, 2011 03:37 AM #30
Rainer
377,445
Kate Akerly
Kaminsky Group - Manhattan Beach, CA
Manhattan Beach Residential Sales

Wow, this is absolutely amazing.  It's unbeleivable what some people are willing to do.  It's also unbelievable what some people are willing to allow others to do to them.  

Nov 10, 2011 04:13 AM #31
Ambassador
1,549,863
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

What a horrible story....and I suspect more prevalent than we suspect.

Nov 10, 2011 05:06 AM #32
Rainer
384,511
Keith Lawrence
Christie's International - Mahwah, NJ
ABR, CDPE, SFR, 203K Specialist

It is a sad story.

 

I tell my clients never to sign any paperwork without consulting with their attorney.

Nov 10, 2011 05:20 AM #33
Rainer
154,163
Deb Espinoza
Stage Presence Homes, San Diego Real Estate - Ramona, CA
GRI, Broker, SRS,ABR ePro, SFR, CNE

These things need to be reported to the Department of Justice- not local police. DOJ is really going after these types of scams/crooks according to what I have heard.

Nov 10, 2011 05:27 AM #34
Rainmaker
1,431,210
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Sadly I think these happens a lot.  Some one tried to scam my brother in law on his VA loan.  They were going to get his interest rate down to 3% and he could skip a payment.  (I looked it over - fixed for 2 years.)

Nov 10, 2011 06:43 AM #35
Rainmaker
196,309
Karen Mathers - REALTOR®
Keller Williams Vero Beach - Vero Beach, FL
When it Matters, Choose Mathers! 772-532-3221

Richard, Thanks for the story. It is happening way to often.  I am sure since they heard him on the radio they thought he was legitimate.  I think the radio station has some liability when they promote scams.  People are desperate and it is hard to find the truth when there are so many people out there ready to make money on people when they are down and out.  I don't see the State doing anything about it and the local authorities don't get it.    

Nov 10, 2011 06:54 AM #36
Rainmaker
810,011
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

Richard:

This such a sad story.  That "savior" is the dregs of the Earth and should be prosecuted to the fullest extent of the law.  Unfortunately, there are people like the lady in your blog who don't understand short sales and she was not only taken advantage of by the "savior" but was misled by the bank representative who advised her to stop making payments on her loan.

Nov 10, 2011 07:12 AM #37
Rainmaker
1,543,065
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Another thing with the police is I don't think they really understand what/where etc the fraud has taken place. Somehow with financial matters the cops are never around when ya need em!

Nov 10, 2011 11:12 AM #38
Rainmaker
1,675,919
Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

Doesn't the sunshine bring out the best in folks? I live in the writers back yard, however Florida has always been known for this type of behavior. I think it stems from DC.

Nov 10, 2011 12:19 PM #39
Rainmaker
226,833
Liane Thomas -Top Listing Agent
BROKER Allison James Estates & Homes BRE 01885684 - Corona, CA
Bringing you Home!

OMG, I hope he goes to jail. Keep us posted.

Nov 11, 2011 04:53 AM #40
Rainmaker
843,557
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Richard, so sad in every market someone looks to take advantage but it is worse it seems in a down market.

Nov 11, 2011 11:18 AM #41
Rainer
128,548
John Fauth
Coldwell Banker King Thompson - Grove City, OH
Turning your dreams into an address!

This kind of information truly needs to get to the masses. There will always be vultures circleing to take advantage of those less fortunate.

Nov 12, 2011 04:22 AM #42
Rainer
166,585
Demarco & Marisa
Remax Kings Realty - Riverside, CA
"The Choice is Clear!"

If it sounds too good to be true, it probably is. I feel so bad for the many stories that I hear weekly of people being defrauded. So sad.....

Nov 13, 2011 04:24 PM #43
Rainmaker
508,351
Sylvie Stuart
Realty One Group Mountain Desert 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagsta

Wow, that is a really sad and appalling story. I wish I were surprised, and am at the method of this scam, but it seems there are a lot of scammers out there ready to take advantage of people when they are in desperate situations. It's very frustrating, and hopefully this family will be made whole again through their efforts to get this guy.

Jan 23, 2012 12:09 AM #44
Rainmaker
2,385,965
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

I would like to hear the end, bet he doesn't serve anytime and may pay a fine of 5k but there is a lawyer that will get him off and that will be his biggest exspense.

Oct 01, 2012 10:24 PM #45
Anonymous
Capt Chris Ramesar

It is really a shame of what some of has become. There are lots of truth in your article. But then again, there at truth as to how some banks handles those who requested help. I am one of those, who was up to date with my mortgage, never late, had a good business, until the economy took a nose dive. I called the bank, with my concerns, I told them that my mortgage was current, my business is failing because of the situation, I do have to reserve funds, but scared that I may fall behind, my credit was over 790 score, they [bank] told me they cannot help, due to the fact that my mortgage was current and that I stated I have reserved funds. This went on for over 18 months, used up all my reserved funds, my business failed, dismissed 15 employees, and I did feel behind my mortgage. It was only then they[bank] started to talk with me. They could have done it 18 months earlier, I would have perhaps saved my business and 15 employees, not defaulted, and saved my credit. But it all went the pipe. What a shame.
Thanks.

Jun 17, 2015 04:34 AM #46
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Richard Zaretsky

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