Q: I got your website name from my son who lives in Atlanta, one of your radio broadcast areas. I live near Charleston and haven’t had the pleasure. Nevertheless, I need advice.
I’m one of those homeowners who is upside down in a mortgage. I’ve recently contacted a not-for-profit company and was told that this company can buy my home and let me rent it for up to four years. At that time, I can buy back the home (or I can buy it back earlier) and I can buy it at 97 percent of the market value at the time.
I’ve been approved for the program, but they’re asking me for $2,000 to continue. This causes me to think it’s a scam. I’ve searched the internet for complaints, but found nothing. Before I agree to give up $2,000 I want to ensure I’m not dealing with the devil. Thanks in advance for your kind cooperation.
A: There are red flags all over your letter, and we usually tell people not to deliver money to companies like this.
What this company is selling you is a product that will cause you to convey title to your home to them now. Once you’ve done that, you effectively become a renter occupant of the home.
You didn’t disclose what the terms they offered you for the next four years, but if those terms were worse that your current loan terms, you’d ultimately end up moving out of the home and this company would be the owner of your home.
Keep in mind, that if they own your home, you are still responsible for the debt on the home. Your “sale” or “transfer of title” to this company won’t relieve you from any responsibility under your current mortgage. So, you’ll owe a mortgage and none of the underlying collateral. The lender, if it finds out, could call your loan immediately.
And, if this company is willing to “buy” the home from you and pay off your current lender, the real questions is whether they are paying off the lender entirely or negotiating a short sale for you. Understand that if they do negotiate a short sale for you, that short sale will affect your credit history and credit score.
You always have the choice of selling the home outright and moving to a place that meets your current budget, but you’d still have to go through the short sale process with your lender. You didn’t indicate that you had stopped paying your mortgage, but that you were seeking help. If that’s the case, we would urge you to talk to your current lender and see if they have any loan modification options available.
Depending on your situation, we’d also urge you to talk to a couple of other reputable mortgage lenders and mortgage brokers in your area to see if your loan is one of those loans that would qualify for a refinancing without considering the current value of your home.
In your email, you sent us the name of the company. We did some research and the company appears to be registered as a not-for-profit in Delaware. But it has only been in existence for a bit over a year and a half. While it might be a reputable company, we would suggest you try your other options first before paying anybody $2,000. Even if this company is legitimate, that cash is quite valuable and you’d hate to throw money away.
One thing you may not know is that some lenders are paying homeowners thousands of dollars to move from their homes and do a foreclosure or short sale. The lenders are discharging the debt, so you get to wipe your slate clean and still have some cash for your move and for a rental security deposit. These are legitimate programs that you should explore. Contact your lender for details.
You might qualify for a Home Affordable Refinance Program (HARP) if you meet a list of requirements: (a) Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae; (b) your mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009; (c) your mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009; (d) your current loan-to-value ratio must be greater than 80 percent; and you must be current on your mortgage with a good payment history in the past 12 months.
You can find out more details about the program at MakingHomeAffordable.gov. And, remember, if you meet all of your requirements, your current lender or loan servicer is only one place to start, you can shop around with other mortgage lenders to see who gives you the best deal in your HARP refinance.
Good luck, and you can listen to Ilyce’s shows on podcast at ThinkGlink.com. Just click the podcast button.