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Leaseback scams target struggling Massachusetts homeowners

Massachusetts homeowners desperate to avoid foreclosure will sometimes grasp at any straw that appears to offer hope. Unfortunately, there are scam artists out there who will take advantage of struggling homeowners.

Scam artists are able to find homes in foreclosure because a foreclosure action is a public proceeding. The lender must generally publish the notice of foreclosure in a local newspaper. Scammers read these notices and use them to contact homeowners.

One of the more common foreclosure scams is the sale and leaseback scheme, also known as equity stripping. This scam targets homeowners who have substantial equity in the property. The scammer will contact struggling homeowners and offer to buy their house and pay off the mortgage, while allowing the homeowners to continue living in the house as renters.

The homeowners are persuaded to transfer the home's title to the scammer. But transferring the title alone does not relieve the homeowners of their obligations to the mortgage lender. And because the rent payments are at least as much as the mortgage payment, and likely more, the former homeowner soon falls behind and is evicted. The scammer will then flip the home for a profit, pay off the mortgage and pocket the equity.

Alternatively, the scammer may simply pocket the rent payments, allow the home to go into foreclosure and pay off the mortgage at the foreclosure sale, keeping the equity as profit. Either way, the former homeowner has lost their home and all the equity he or she worked for years to build up.

Homeowners who are struggling to make their mortgage payments need to be aware of this and other foreclosure scams. Consulting a reputable debt relief attorney can be the first step in developing an effective strategy to stop foreclosure and keep one's home.

Source: Findlaw, "Protect Your Home from Foreclosure Rescue Scam Artists," accessed April 10, 2016

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