Q: I have a contract for deed for the purchase of my home. I pay my mortgage to an escrow account. The escrow company then chops up my check and pays my homeowners association dues, the mortgage, and gives a small amount each month to the mortgage broker who got me the house. At some point they stopped giving the money to the actual lender and started giving it to the mortgage broker that made the contract with me.
During the last year the mortgage broker started taking all of the money (less the homeowners association fee and put it a separate account and stopped paying the mortgage. They did this because the market crashed and they could not pay their own bills as all of their rentals and contracts were foreclosing last year.
I did not know this till around April of this year when I got a foreclosure notice in the mail telling me my house is in default. I called up my mortgage broker and asked why I got the foreclosure notice since I’d been paying in good faith and on time for the last 2 years. He told me that the company was in bankruptcy and he couldn’t pay his bills, so he didn’t pay mine.
Their solution is that they’ve been putting my money in some account for a year, and then sold my house in a short sale to their father-in-law, and telling me I’ll be fine. But I’m not fine.
I’m starting to have issues of my own financially. I can’t make my mortgage payments. I don’t know if I still own this house or have any rights to it. It all sounds funny to me and I feel like I’m getting the short end of this deal. They are or were sitting on thousands of dollars I paid in good faith for my mortgage payments. Is this fraud?
A: I agree – something sure doesn’t smell right and it may well be that your attempt to buy the home using an installment contract for deed may have resulted in a mortgage fraud against you. You really need some serious legal help ASAP.
I don’t know if you used a real estate attorney to advise and help you through the process in buying the home using an installment purchase agreement. Many people believe they can protect themselves in a purchase of a home using a contract for deed (also known as an installment purchase agreement for deed), but they end up being wrong and lose out on the money the put down towards the home and the equity they have built up towards the purchase of the home.
From the installment contract buyer’s perspective one of the most important things to know is that just because everyone signs the installment agreement contract, you don’t yet own the home and must make sure that the bills of the home get paid. Because a contract buyer doesn’t actually have title to the home until the last payment is made, that buyer must make sure that the mortgage, real estate taxes and any homeowner’s association assessments are paid in full, and on time.
What you need to determine is the responsibility of the escrow company. If you truly signed an escrow document for the payment of your expenses, was the escrow company an independent company responsible for the payments? In some cases buyers pay money to the seller for the payment of these expenses. A seller can commingle the funds and your investment would be at risk.
In your letter you use the terms “escrow” and “mortgage broker” but it actually seems that you were dealing with the seller – the owner of the home – and that when going got tough, your seller used your money for his own separate purposes.
If the seller was acting on behalf of the seller and was in fact “mortgage broker,” you might also check with your state to see if the “mortgage broker” is even licensed to do business. You should call the state agency or department that regulates mortgage lenders and discuss the situation with their consumer advocate or ombudsman. You can ask the department to open up an investigation into the mortgage broker and this particular practice.
One thing I know for sure is that you should have had an attorney review these documents before you signed for the house. The whole way this payment system was set up initially is quite screwy and even if you take decisive action now, you might still wind up losing everything you have paid so far.
Please contact a real estate attorney so you can discuss the possible ramifications of what you’ve done. If you can’t afford an attorney, please contact your local Legal Aid Society to see if you can find someone to help you.
For other articles explaining installment contract for deeds read the following: Installment Purchaser for Deed