Non-Transparent Services with a Shifty Smile
How can you tell a potential real estate scam or, at least, overpriced services? Someone will propose an outlandish solution, but the explanation is based on "it just works" and is never fully explained to you. I really hate having to drag out what the exact methodology behind the solution is, and lately whomever I'm speaking with knows I author a blog so they kind of shut up even more
Here are three propositions that I've heard but were never fully explained to me:
"Fix your credit in 30 days" services (google "fix credit" and find loads of companies) generally rely on disputing negative reports in the hope that the reporter of the negative item won't respond. Once disputed, the credit fixer can show the client a "cleaner" report, but it's clean while the disputed items are being investigated. It is said the credit bureaus are onto this game...
The other credit fixing solution relies on having poor credit clients piggy back off the credit of strong credit holders by becoming the authorized users of their credit cards. Thanks to Tony Howell for explaining this method.
The "interest reduction solution" - pay off your 30 year mortgage in 8-10 years
Customers pay $3,500 for a software program that essentially manages money and instructs the homeowner to use any surplus cash to pay down the principal. The sales pitch seems wrapped around the value of the money management software; the methodology of paying down principal is a "duuh" moment that can be accomplished without paying for the software. This is not really a scam, it's very pricy software.
Refi your loan every six months and pay it off quicker!?
New transparent mortgage blog Applyblog details the lending scam no one yet knows. Simply put, loan officers refinance the loans of their borrowers and kickback about 1/2 of their Yield Spread Premium commission to the borrower. Both the broker and the borrower win from the commission payouts, the lender loses by refinancing the same or similar loan.
Late last year, I met a mortgage broker doing this because he was opening refi escrows with the same borrower (and different lender) every six months. I couldn't figure out how he could recruit borrower clients for this scheme. Now that Applyblog has explained this one, it just seems illegal and prosecutable.
Technorati Tags: scams, credit repair, mortgage scams, interest reduction, applyblog
You might want to mention all of the "save your house from foreclosure" scams.
Once foreclosure proceedings begin against your home, the sharks come out. Investors will literally appear at your doorstep, basically waving money in your face and saying that they will "save the house" by buying it, and then renting it back to you. I have heard of one innstance where the unlucky homeowners went to close on the house,and then afterwords the investor said, well, hey.... we can't do this rent thing unless we escrow a year's worth of rent upfront (Which of course was not an option for the victim) and the victims were out on the street in a very short time. They would have been better off staying in the home until the end of the redemption period.
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Believe it or not, I have met people in the classroom that have set up their entire business model based only on refi-churning such as this.
Of the many problems with this business practice are the sheer dollars spent in ancilary costs over and over again: title, escrow, flood hazard check, underwriting fee, processing fee, loan origination fee, mortgage broker fee, and so forth.
This business practice could arguably fall under the catagory of equity SKIMMING even though it is sold as a mortgage reduction program. Equity skimming is classified as a prohibited practice under most state mortgage broker laws.
How much lower will the industry allow itself to go?
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Refinancing or re-structuring the loan doesn't really help much. The borrower just transfer the burden to another mortgage company or just delay the payment for a few weeks but in reality it becomes much more difficult because it only prolongs the agony of paying the installments.
http://www.costaricaconsultants.com
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During the boom times people will do whatever it takes to make a buck. Where are they now?
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