By GARY M. SINGER Sun Sentinel
Q: I was solicited by a company that said it could reduce my mortgage, and I'd have 20 percent equity in the home when all is said and done. The firm proposed a complex legal plan that begins when I deed my home to a trust and pay a $2,500 fee. Is this legitimate?
A: No. The land trust sues your lender with a special type of lawsuit that is normally used to clear up legitimate ownership or title issues. The hope is that your lender will not notice that it is being sued, allowing the land trust to get a court order saying that the mortgage lien is gone. This may even happen. If it does, you will be asked to buy your property back from the land trust.
What the scammer is not telling you is that you still owe all of that money to the bank. And once the bank catches wind of what happened, it will go back to court and correct the issue. Further, because the closing companies are on to the scam, no title company will be able to issue a title insurance policy for you to sell or refinance your home. The net effect of all this is that you get to give the scammer all sorts of money you can't afford to lose and end up losing your house anyway.
It's sad to say, but with the real estate market starting to pick up, mortgage scams are on the rise. Keep all this in mind:
• Never sign anything that you don't fully understand. Ever. No exceptions.
• Never deed your property to anyone who you are not selling it to and who is not paying off your mortgage at the closing.
• Never make mortgage payments to anyone but your lender, unless your lender instructs you to in writing.
• Never pay anyone up front for a loan modification or to "qualify" for some government or lender program.
• Don't pay for what's called a forensic audit, which is a report that details any problems with your mortgage. It will not make your lender modify your loan, and even if you are somehow able to cancel your mortgage, you will still need to return the money that your lender gave you.
• Do not sell your property to someone because he or she is going to lease it back to you, and/or let you buy it back in a few years. This is one of the oldest scams out there. The scammer has no intention of letting you stay in the home once it is signed over. Shortly after you sign the paperwork, he or she will figure out a way to get you out and will typically leave you owing your mortgage lender without the house to show for it.
Beware of any tricks with a short sale that will let you, or a relative, keep the home or buy it back later. Your lender will typically make you promise not to do this, and lying to your lender to obtain a short sale is a crime punishable by jail time.
Q: I'm renting my home to tenants whose lease doesn't expire until next spring. With the housing market turning around, I think I can get a good price if I were to sell now. But how do I get the tenants out?
A: You don't, unless they agree to leave. When you rent your home to tenants, you allow them to occupy it as long as they follow the rules set out in the lease agreement, such as paying rent and not destroying your property.
Some people in your position have used unethical tactics to try to force the tenants to leave, such as changing the locks or turning off the utilities. But these tactics have stiff consequences, and if you try this, you will end up with the tenants still in the house with a pile of your money. Or they will be out of the house with even more of your money.
I have seen landlords "buy" the tenants out of the lease by negotiating a lump sum payment. You may want to try to offer your tenants several months' rent to leave and see if they agree.
Another option for you is to leave them in place and still try to sell the home. A property with paying tenants can be very attractive to some buyers who are looking for investment properties.
The final choice may be to wait a few more months, then list your property for sale, with the closing date set to be shortly after the end of your lease agreement.
People often ask me what they can do to rebuild their credit and get their financial house in order after the foreclosure or short sale is over. But before you start worrying about your credit score - which just gives you the chance to take on more debt - take steps to establish a foundation for a better financial future.
Create a lifestyle in which all of your family's necessities - rent, utilities, food, cars, insurance, clothes - total no more than 70 percent of your household's combined take-home pay. The next 10 percent of your pay should go straight to savings so that you can build a cushion to protect your family from any future problems. The remaining 20 percent should go toward paying off your remaining debt, and if you do not have any other debt, put it into savings for large future purchases, such as your next car, home or vacation. Or plow some of it into retirement savings. With all this money in savings, you may be able to avoid, or at least minimize, borrowing in the future and keep all of the interest and finance charges that you would have paid to the bank.
Once you have your monthly spending under control and a good start on your savings, it will be time to think about your credit score so that you can qualify for the best terms on any future borrowing. Some ways to improve your credit score: keep balances low on credit cards and other "revolving" debt; pay off other debt; keep older accounts open and avoid opening new accounts more than you have to; request a copy of your credit report and correct any errors; and set up payment reminders or automatic-bill-pays so that you do not miss payments accidentally.
About 80 percent of your credit score is based on how much you owe and your payment history, both the on-time part of it and the overall length. If you make your payments on time, pay off as much debt as possible, and don't close old accounts, your credit score should rise like a phoenix from the ashes. Going through a foreclosure or a short sale is a very difficult process, but many of my clients have moved past it, cleaned up their credit and even taken out another mortgage.
Send Gary M. Singer questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.