Tuesday, November 22, 2011

Rent-To-Own Ripoffs, Short Sale 'Flopping', Rent Skimming, Deceptive Trade Practices Among Charges Flying At Suspected Foreclosure Rescue Racket

In West Palm Beach, Florida, The Palm Beach Post reports:

  • The Nationwide Investment Firm peddles foreclosure rescue to South Florida's most desperate homeowners, offering to beat the banks while maintaining dignity and peace of mind.

  • Amid the wreckage of this once vibrant real estate market, the 3-year-old Boca Raton company persuades struggling borrowers to quit claim-deed their properties to Nationwide. In return, the for-profit firm promises to streamline a short sale and negotiate a debt-free ending for the homeowner.

  • Instead, homeowners say in at least five lawsuits filed this year in Palm Beach and Broward counties, they've been pulled into a game of real estate musical chairs in a short sale ruse that has grown to involve dozens of homes in Palm Beach, Broward and St. Lucie counties. The lawsuits describe variations of alleged real estate wrongdoing, but mostly revolve around one business model.

  • While Nationwide negotiates a short sale, often with the intent to buy the property itself at the cheapest possible price, the homeowner is shuffled into another Nationwide property where he or she puts 20 percent down to enter into a rent-to-own style contract.


  • [A]ttorneys who filed the suits against the firm and its president, Guilfort Dieuvil, say the company, in truth, is violating arm's-length short sale rules meant to prevent the type of house flipping partly responsible for the economy's epic failure.

    Affidavit aims to prevent abuses

  • Most major lenders require an " arm's-length" affidavit be signed at closing. While the affidavit may differ by lender or servicer, it must generally include language that says the short sale transaction has been negotiated by unrelated parties, who do not share business or familial relationships, and that there have been no prior agreements for the owner to remain in the property as a tenant or to regain property at any time after the sale.

  • According to national mortgage backer Freddie Mac, the short sale addendum is to prevent "common schemes where the borrowers sell their property to a prearranged straw buyer or family member who allows them to stay in the home after the short sale, with a greatly reduced mortgage obligation."

  • Two of the recently filed lawsuits include charges of "flopping" ­­- defined as when the company negotiating the short sale tells the bank it is getting less for the property than what the buyer is actually paying, thus the company pockets the difference.

  • Other specific charges in the lawsuits include violations of Florida's Deceptive and Unfair Trade Practices Act, statutory disclosure requirements that apply when buyers assume fee obligations to homeowners associations, and the state's equity skimming statute that is supposed to prevent people from applying rents from foreclosed dwellings for the person's own use, according to one lawsuit.

For more, see Investment firm offers salvation to distressed homeowners, but some say they were misled.

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