The thing about being a homeowner in distress who is talking to for-profit home counselors, well, it is sort of like being thrown into a shark tank with a bloody leg. There's only one ending to that scenario, and it ain't pretty. Once your home goes into default, out come the wolves in sheep clothing. You don't know who to trust. You don't want to lose your home but you can't afford the mortgage payments anymore, and you owe far more than the home is worth. A short sale seems like your best bet, and it very well may be, but because of your innocence and inexperience in these matters, crooks can take advantage of you, and they will.
Why to Lease or Buy Back a Short Sale Could Be Mortgage Fraud
Mortgage fraud happens when information is withheld from your lender which, if the lender knew about, would cause the lender to reject your short sale. It's called pulling the wool over the lender's eyes. It is non-disclosure.
The major banks such as Bank of America, Wells Fargo, and JP Morgan Chase have caught on to the shenanigans played by investors and shady agents and, in particular, the greedy companies formed solely to feast on the downtrodden. Following are the types of actions many banks specifically prohibit, either through the arm's length affidavit, which is signed by all parties, or in the short sale approval letter itself:
- No transfers to third parties by deed at closing.
- No under-the-table special agreements between agents and principals.
- No sales of subject property within a certain time period, typically 90 days after closing.
- Sellers must vacate the property and cannot rent back.
- Sellers cannot receive any money or profit secretly from the short sale.
Be suspicious if you are asked to deed your home, transfer title, to another person or a company before closing. Some unscrupulous companies will record your deed and then wheel and deal with your bank as a principal, without any involvement from you. Yet, you are still responsible for your loan.
When a Short Sale Leaseback or Buy Back is Not Mortgage Fraud
As much as you might want to view the investors as angels of mercy, these guys are no angels. There is nothing angelic about a company that takes away your home and dictates the terms under which you can pay through the nose to buy it back. They'll sell it back to you all right, way over its market value at that time.
If your lender has full disclosure and does not object, you can pretty much do what you want. But the lender is likely to object. If you move forward, get it in writing from your lender that it's OK to lease back or buy back your short sale. For crying out loud, get legal advice. I am not a lawyer and cannot give you legal advice.
A Fannie Mae short sale might offer you a lease-back and / or buy back. Fannie Mae is a government sponsored enterprise, meaning it's basically owned by the government. And the government, just not private parties, can make side deals with you. Bear in mind, however, that Fannie Mae is not your friend either.
All in all, you're typically better off to sell your home as a short sale, move out and rent something else for a few years, and then buy a home similar to the one you used to own at probably half of its original cost. That game is being played out all over the country, and this one is legitimate. It's how a true "no strings attached" short sale works.
