Question:

What is the Mortgage Rescue Fraud Prevention Act?

Answer:

Some states have proposed a Mortgage Rescue Fraud Prevention Act to provide protection for homeowners since mortgage rescue fraud has become a very popular lending scam.

What is a mortgage rescue fraud?

Mortgage rescue scam occurs when the so-called rescuers offer to buy the home of a delinquent borrower, collect rent from them and sell the house back to the homeowner in one or two years. Meanwhile, home owners are expected to have improved their credit and finances.

Those mortgage rescue fraud artists are transferred the deed, get another mortgage on the house, and pay some cash to the owner. As a result, home owners lose a lot of cash and are severely stripped of home equity.

The Mortgage Rescue Fraud Prevention Act explains the strategies involved by "home rescuers":

  • They offer to buy time until home owners catch up with payments.
  • Demand transfer of the deed without specifying how it is going to be used.
  • Force homeowners to sign documents containing blanks.
  • Promise to provide financing at the end of the lease period.

In addition, the Mortgage Rescue Fraud Prevention Act lays out the conditions for a mortgage rescue to take place - a written sales contract to be provided; right to cancel within several business days; objective evaluation of the homeowner's ability to buy back their property and the mortgage rescuer is obliged to pay at least 80% of the home value to the owner, if they are unable to buy their property back.

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