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Housing Forclosure Scam
Old 11-28-2008, 09:03 PM   #1
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Housing Forclosure Scam

Went to a friends house for Thanksgiving. They are renting. The husband told me that they had been contacted by a bank that told them the house was being forclosed on. I told him he needed to be carful not to get stuck having paid rent for the following month and then get evicted. He said the owner was a man from Ireland and that the man paid $970,000 for this house which in my opinion was way more than it was worth. When I got home I started thinking that if he the foreigner had gotten a loan for an inflated house value and then collected rent for half a year without making a payment on the house and possibly being in cahoots with the builder of the subdavision pocketing extra cash there was nothing the american bank could do to collect. Then I went to the local tax assessors site and found that all the homes in that subdavision were purchased at over valued prices by foreigners. And according to my friend most of the homes were going into forclosure. It seems to me this is quite a scam on the American banks and who would have been aware of the fraud is a big question. But it makes me mad that some hard working persons cash that was used to make these loans was invested in such a foolish manner. And to top it all off the big BAIL OUT plan will probably be going to banks that have made the same stupid mistakes. There got that off my chest. ha ha
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Old 11-28-2008, 11:06 PM   #2
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It was all a scam when you get down to it.
Don't feel bad about the rant. Check this out for a chuckle.

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Old 11-29-2008, 12:48 AM   #3
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And to top it all off the big BAIL OUT plan will probably be going to banks that have made the same stupid mistakes.
Gee, I thought those were the financial geniuses with MBA in finance from top business schools.
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Old 11-29-2008, 05:55 AM   #4
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We are hoping to sell our house soon and become renters. Our real estate agent told us to put a note in the rental contract that says rent is only due after proof of the previous month's mortgage payment is sent to us. She said it's become common for people having money problems to rent out their house and move. They then don't make any payments on the mortgage. When the bank takes over, renters have 2 days to vacate the property. They will usually not be informed that the property is in forclosure. The "landlords" can get six months rent or so plus any damage deposit.
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Old 11-29-2008, 09:30 AM   #5
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It's quite possible that a US bank was not involved in the mortgage. Between 1993 and 2006 the Irish property market was "on a tear". Ordinary family homes were selling for 1 million euros. Since most people there have a lot of their NW in their homes, many of them made a ton of money flipping homes. As the property bubble expanded, Irish property went out of reach, and they began to look abroad. Property developers were scheduling weekend flights to Bulgaria where naive speculators put their deposits down for off plan properties. Even my own relatives, when vacationing in the US in 2004, were amused at what they viewed as ridiculously cheap house prices in Washington DC (they didn't buy). In the rush to buy, many buyers didn't look too critically at the price. Irish banks fed into this, and they are now in trouble too.

IMHO this is one more reason for improved financial international regulation. There is a need to protect the public from the greed of naive investors.
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Old 11-29-2008, 09:43 AM   #6
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We are hoping to sell our house soon and become renters. Our real estate agent told us to put a note in the rental contract that says rent is only due after proof of the previous month's mortgage payment is sent to us. She said it's become common for people having money problems to rent out their house and move. They then don't make any payments on the mortgage. When the bank takes over, renters have 2 days to vacate the property. They will usually not be informed that the property is in forclosure. The "landlords" can get six months rent or so plus any damage deposit.
I doubt that a renter would only have 2 days to move. The bank would have to go thru an eviction process just like anyone else which takes much longer than 2 days.
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Old 11-29-2008, 09:53 AM   #7
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In states where I am aware of the law, to get rid of a tenant takes at least a month notice. If the tenant has a long term lease that interest may have to be foreclosed out as part of the foreclosure, requiring notice on the tenant.

Of course, different states will have different rules. Foreclosure law is local.
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Old 11-29-2008, 10:08 AM   #8
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We are hoping to sell our house soon and become renters. Our real estate agent told us to put a note in the rental contract that says rent is only due after proof of the previous month's mortgage payment is sent to us. She said it's become common for people having money problems to rent out their house and move. They then don't make any payments on the mortgage. When the bank takes over, renters have 2 days to vacate the property. They will usually not be informed that the property is in forclosure. The "landlords" can get six months rent or so plus any damage deposit.
What would happen if you didn't get the proof of the previous month's mortgage payment sent to you? I guess your lease would be broken and you would have to move?
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Old 11-29-2008, 11:36 AM   #9
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Our real estate agent told us to put a note in the rental contract that says rent is only due after proof of the previous month's mortgage payment is sent to us.
Rarely should you get legal advise from a rental agent, unless they also are property managers with substantial experience. I doubt any landlord would agree to providing proof, 30 days later that payment was made, when the rent is due on the 1st.


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She said it's become common for people having money problems to rent out their house and move. They then don't make any payments on the mortgage.
They still own the property and you still are living there. So you still owe them the rent.

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When the bank takes over, renters have 2 days to vacate the property. They will usually not be informed that the property is in forclosure. The "landlords" can get six months rent or so plus any damage deposit.
This is highly state and city dependent. Ca, as an example, requires the lender to formally notify all residence at least 60 days before the sale date. There are even more hoops to jump thru, which takes longer, if the property is rent controlled.

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The "landlords" can get six months rent or so plus any damage deposit.
You live there, you pay rent. If you don't pay the rent, the landlord can evict you. After all, he owns the property until it is sold at forclosure, and that is plenty of time for him to get an eviction judgment. Even after the forclosure sale he can sue for back rent. He might even claim lack of rent caused the sale and sue for damages.

So, I would not take advice from a real estate agent about rental law.
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Old 11-29-2008, 12:22 PM   #10
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I also vote that the agent gave odd advice. It's probably not a bad idea to get some evidence before you move in that your landlord is paying their mortgage, but to write it into the contract that no rent is due until they have paid their mortgage puts you into a bind... as the last poster said failing to pay the rent doesn't protect you from unexpected eviction; it only increases that possibility.

If you don't want to be unexpectedly evicted, don't deal with flaky landlords. There's no fix that an agent can put in that will save you from someone who wants you gone.
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Old 11-29-2008, 01:00 PM   #11
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This reminds me of Hawaii's 1989 real-estate bubble, when a Japanese billionaire bought many local homes. In at least a few of the cases, he purchased from the homeowners and rented back to them without even bothering to get out of his limosine.
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Old 11-29-2008, 02:04 PM   #12
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I got a lot of feedback on my post about only having 2 days to move out of a forclosed house. The key item in this is that the lease is terminated by the forclosure. Unless the landlord lets the tenant know, they aren't involved in the process at all. The sheriff (or deputy) comes to the door and informs the tenent they have two days to vacate. If you're not home, they tack it to the front door. In two days, they move all of your belongings onto the front lawn.

This is Texas law. It doesn't matter if you are renting with a paid up lease or not. There would be a possibility of renting from the bank/mortgage company if they were interested but that's not too likely. It has happened to people here.

My son was in a rental that was foreclosed and the landlord called him to tell him it was being forclosed on about 2 months in advance. He moved out easily but he had a nice notice. If it wasn't for the landlord being decent, he would have been out on the street.

There was an apartment complex that was forclosed on recently. It was on the local news The owner had made off with several months rent. The mortgage company wanted everyone out in two days. The news media whipped it up and the company agreed to let people stay if they paid the rent for the future month to them. The apartment complex was low end and full of minorities that got the sympathy of the station. One honkey (or howlie in Nords' case) in an upscale rental house would not get any.

What's funny is that if they were paying the mortgage and I stopped paying the rent I'd have all sorts of rights. I could drag out an eviction and not pay rent for 6 to 9 months if I played the game right. In the end, the sheriff would still knock on the door and my two days would begin. The big difference is that I'd know he was coming months in advance. I also wouldn't have been paying any rent (and probably utilities) that whole time.

If I put a requirement into the lease that I must receive documentation of the mortgage being paid, they are not meeting their contractual obligation so I get to not pay the rent until they do.

I pay my mortgage on line the first of every month. I can print a mortgage statement showing the mortgage was paid the next day. I could mail or email the PDF to a tenant the same day. This isn't a burden on a legitimate operation.

The agent that told me this was the one that listed our house. She said it had happened to clients of other agents in her office. She also said that requesting a clause like that is becoming very common because the problem is becoming very common. She said that no listing rental agent would put up any serious objections to having it put in. In the event the investor owned the property outright, they can show me the deed.
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Old 11-30-2008, 12:17 PM   #13
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Regarding the OP suspicion that the owner has been pocketing rent while not making mortgage payments, the BusinessWeek issue dated Dec 1 had the cover page screaming "The subprime wolves are back, and they are feeding off the bail out".

The cover article describes how scam mortgage brokers are now switching from subprime loans to FHA loans, whose limits will be raised from $363K to $625K in January 09.

The article also mentioned a scam broker whose "borrowers on nearly half of the company's defaulted loans made payments for only three months or less; 105 borrowers never made any payments at all". (p.42 - BW 12/01/08)

Doesn't that make your blood boil, seeing your tax dollar at work?
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Old 12-01-2008, 08:03 AM   #14
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I got a lot of feedback on my post about only having 2 days to move out of a forclosed house. The key item in this is that the lease is terminated by the forclosure. Unless the landlord lets the tenant know, they aren't involved in the process at all. The sheriff (or deputy) comes to the door and informs the tenent they have two days to vacate. If you're not home, they tack it to the front door. In two days, they move all of your belongings onto the front lawn.

This is Texas law. It doesn't matter if you are renting with a paid up lease or not. There would be a possibility of renting from the bank/mortgage company if they were interested but that's not too likely. It has happened to people here.

My son was in a rental that was foreclosed and the landlord called him to tell him it was being forclosed on about 2 months in advance. He moved out easily but he had a nice notice. If it wasn't for the landlord being decent, he would have been out on the street.

There was an apartment complex that was forclosed on recently. It was on the local news The owner had made off with several months rent. The mortgage company wanted everyone out in two days. The news media whipped it up and the company agreed to let people stay if they paid the rent for the future month to them. The apartment complex was low end and full of minorities that got the sympathy of the station. One honkey (or howlie in Nords' case) in an upscale rental house would not get any.

What's funny is that if they were paying the mortgage and I stopped paying the rent I'd have all sorts of rights. I could drag out an eviction and not pay rent for 6 to 9 months if I played the game right. In the end, the sheriff would still knock on the door and my two days would begin. The big difference is that I'd know he was coming months in advance. I also wouldn't have been paying any rent (and probably utilities) that whole time.

If I put a requirement into the lease that I must receive documentation of the mortgage being paid, they are not meeting their contractual obligation so I get to not pay the rent until they do.

I pay my mortgage on line the first of every month. I can print a mortgage statement showing the mortgage was paid the next day. I could mail or email the PDF to a tenant the same day. This isn't a burden on a legitimate operation.

The agent that told me this was the one that listed our house. She said it had happened to clients of other agents in her office. She also said that requesting a clause like that is becoming very common because the problem is becoming very common. She said that no listing rental agent would put up any serious objections to having it put in. In the event the investor owned the property outright, they can show me the deed.
Im not an attorney, but I am a police officer (18 years) in Texas and Im almost certain that this is NOT Texas law.
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Old 12-01-2008, 10:50 AM   #15
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....
If you don't want to be unexpectedly evicted, don't deal with flaky landlords. There's no fix that an agent can put in that will save you from someone who wants you gone.
There is little to stop a "flaky landlord" from buying the property you rent. Happened to me in June '06, in Aug. 06 I was in my first protest march (against the new landlord). My landlord did and does want all existing tenants gone, but some of us are taking the Tenant's Union advice to stay. I'll probably fill up a bit of my retirement time at the courthouse to see how "Mr. flaky" does against the massive lawsuit the city has brought against him--bottom line, the city wants to put him out of business within the city/county limits. It's mind boggling to imagine his 300+ apt. buildings in receivership.
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Old 12-01-2008, 03:44 PM   #16
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I am not a Texas lawyer, but I found this on the web about eviction of tenants in Texas after a foreclosure:

Eviction. In the event the borrower or tenants remain on the property after foreclosure and receiving notice and demand to vacate, it may be necessary to institute eviction procedures. Tex. Prop. Code §24.00 et seq (see Appendix “B”). Generally speaking, once the Sworn Petition is filed, it takes ten days to two weeks to obtain a hearing. Consequently, a typical eviction usually takes approximately one month depending upon how quickly service may be obtained and how quickly the Justice of the Peace Court with jurisdiction over the case moves its docket along. The only acts over which an attorney has any control are sending the Notice to Vacate letter, filing the Petition, attending the hearing and requesting a Writ of Possession after the statutory appeal period has expired. In summary, the basic procedures involved in an eviction of a foreclosed residential property are:
a. Notice to vacate. A Notice to Vacate providing 3 days notice is sent via regular and certified mail. The 3 day period begins to run from delivery of Notice.
b. Filing of the Forcible Detainer Petition. The “FED” petition may be filed any time after the 3 day Notice period has expired.
c. Issuance of the citation. The Justice Court is required to issue Citation immediately upon the filing of the Petition.
d. Service of the citation. Initially, personal service of citation is attempted. If attempts at personal service are unsuccessful, alternative service is allowable.
e. Trial. The Eviction Trial must take place between six and ten days from the date of the service of Citation.
f. Deadline for Appeal. The writ of possession may be issued by the Court six days after the date the Judgment is rendered. A tenant who leased the property from the Defendant is entitled to at least thirty (30) days to vacate after Notice is given depending upon whether they can prove they are current in rental payments; and
g. Execution of the writ. Discretion is given to the officer serving the writ to post a warning that the writ has been issued and will be executed on a specific date.



Texas Foreclosure Law (Part 3)

Pretty harsh. But nevertheless, it still sounds like people have some time to get out after the three day notice.

In contrast, Minnesota law requires one months notice before hand.
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Old 12-02-2008, 05:36 PM   #17
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Im not an attorney, but I am a police officer (18 years) in Texas and Im almost certain that this is NOT Texas law.
Between you and Martha I'm being spanked pretty hard. I'm repeating what my real estate agent told me. I was also reinforced by the apartment attempted eviction. The time frame may have been lost in the translation.

In any case, it appears wise not to just send checks to someone not paying on their property. In the worst case I could lose a month's rent and the damage deposit. If I get the opportunity to rent soon, I think I'll bring it up.

From Martha's post, I'd still have many more rights if my landlord was current on his mortgage and I was the deadbeat.
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Old 12-02-2008, 09:28 PM   #18
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From Martha's post, I'd still have many more rights if my landlord was current on his mortgage and I was the deadbeat.
For sure. Texas needs to work on that.
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