The thing is, when I first heard about this I thought that I recognized the con, it was common enough and anyone who read a paper or watched the news heard about it, and what makes it even more interesting is President Obama is now proposing the federal government do the EXACT same thing.
What happens is pretty standard, a mortgage broker or someone working with a mortgage broker looks for someone with a distressed property, someone about to be foreclosed on. They are easy to find because foreclosures have to be published before hand. Then they had to find someone with a little cash and good credit to sell the idea to.
The idea being that the purchaser can save the property from foreclosure by buying it from the owner. The owner then rents the property from the new buyer, often the agreement would be to sell it back or make it a lease purchase or some other deal. It’s sold as a can’t lose because of the way property prices were skyrocketing.
The mortgage broker gets a nice commission on the sale, then often convinces the new purchaser to refinance the property sometimes for even more than it is worth, again making a nice commission.
The broker may also be the one who collects the rent from the original owner, all for a fee of course…and that rent often never made it’s way to the new owner.
So now that you understand that, lets look at what happened here. Kayden purchases the home but never gets the required rent, either because the broker kept it or because the initial problem that the homeowner wasnt making his payments was still a problem. So she cant keep up with it and the plummeting housing prices and market forcing the house into foreclosure.
So initially it looks like she might be a bad guy and gets charged with a felony…that is until the prosecutor sees her records and the fact that the rent payments werent made…her felony charge gets dropped, she didn’t profit from the transaction, matter of fact, she lost money and she has the IRS audit along with all the documentation from that year to prove it.
So who is still charged with a felony? The brokers…you figure it out.
Kayden gets a misdemeanor for not having a rental contract with the homeowner.
So Kayden, it wasn’t hard to support you, I knew what had happened, what was hard was keeping quiet about it so as not to jeopardize your case. It’s all over now and it’s behind you.
People who read this will understand now, it wont change the mind of some of them but it certainly should be understandable by anyone who can read a paper.
What really concerns me is now Obama is proposing that the federal government buy properties in foreclosure and rent them back to the owners…..
Does this sound familiar?
3 Responses
Yes it does sound familiar, and is what I assumed was going on when I first heard this story.
This type of real estate transaction was going on all over California a few years ago, especially in areas like Sacramento and Riverside. And, assuming everyone kept their word, it worked out okay for the original owner and the new buyer.
“But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality – the men who seek to replace the mind by seizing the products of the mind.
“Money will not purchase happiness for the man who has no concept of what he wants; money will not give him a code of values, if he’s evaded the knowledge of what to value, and it will not provide him with a purpose, if he’s evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why [so many] call it evil?
…
“Money is your means of survival. The verdict which you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men’s vices or men’s stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment’s or a penny’s worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you’ll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of [the common] hatred of money?
“Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of [the common] hatred of money?
“Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?
…
“But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich – will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt – and of his life, as he deserves.
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“When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, ‘Who is destroying the world?’ You are.
You left out the one integral part of the scam.
The appraiser. The appraiser comes in and writes an inflated
appraisal, thus allowing the home to be financed for more than the
true value of the home. When the payments don’t get made, the victim
(Kayden in this case) gets stuck holding a mortgage for more than the
home can possibly be worth. And all the credit and legal issues that
ensue.
I have 2 such homes down the street from me….one was mortgaged at
$160,000 in a neighborhood that I bought a house in for $70,000. The
owner was a retired woman in California, who someone convinced to put
her name on the line for a property she only saw pictures of. Yes , an
idiot, but also a victim.
The appraisal on the home was in the $180’s. A fake appraisal though.
Tvshooter