By Rae Anne Smith, Legal Aid Society
Many people experience a rough financial patch from time to time. For some homeowners, one last-ditch attempt at getting back on firm footing can be taking out a home equity loan or mortgage that uses their home as collateral.
But, as some Middle Tennessee residents have found out the hard way, unscrupulous parties out there are targeting homeowners with offers of financial assistance that come with an unwelcome surprise.
Some homeowners who think they’re getting a loan or new mortgage to avoid foreclosure or to pay off their immediate debts are finding out, sometimes years later, that the party supposedly offering them help has taken title to their home — and for an amount much less than the home’s actual value. The way homeowners typically find out is when they miss a payment on their supposed loan and receive a notice evicting them from their own home.
At Legal Aid Society of Middle Tennessee and the Cumberlands, where I’m an attorney, we’ve assisted several clients dealing with variations of this situation. The common denominator for homeowners we encounter is that they’ve been unable to get traditional financing, typically because of their credit history or their income level. Their resources to pay their obligations are limited, which makes them easy targets for scammers.
When a homeowner becomes the victim of a foreclosure rescue scam, the law fortunately provides certain protections and remedies. However, if court action becomes necessary, these cases can take months or even years to resolve.
If a court determines that the adverse party failed to provide the homeowner with required disclosures, that the adverse party defrauded the homeowner, and/or that the intent of the parties was a loan to the homeowner (not the sale of the property), then the court can rescind the transaction and restore legal title to the homeowner. However, if the adverse party paid money for the homeowner’s benefit — examples would be paying off the existing mortgage to prevent foreclosure, paying property taxes, paying property insurance, or making improvements to the property — the court will likely order the homeowner to reimburse that amount.
If this sounds like a stressful and time-consuming experience to go through, that’s because it is. It’s far easier for homeowners to steer clear of this kind of situation if they can help it.
If you’re a homeowner, before you sign any document involving your home, read it carefully — don’t take the word of anyone who may not have your best interests at heart. Take the paperwork to someone you trust, and if possible, get legal advice so you know exactly what’s going to happen before you sign anything. Most importantly, don’t sign anything where there are blanks to be filled in later. Keep copies of everything you sign in a safe place.
If you’re facing potential mortgage foreclosure or other financial pressures, and you have equity in your home, be aware that somebody who claims they’re there to help might not be.
If you need assistance fighting back against a foreclosure rescue scam, or you’re concerned about a document you recently signed, please contact Legal Aid Society at 800-238-1443 or visit our website at las.org.
About Legal Aid Society
Rae Anne Smith is a staff attorney in the Tullahoma office of Legal Aid Society of Middle Tennessee and the Cumberlands, focusing on consumer protection and other areas of law. Legal Aid Society of Middle Tennessee and the Cumberlands advocates for fairness and justice under the law. The nonprofit law firm offers free civil legal representation and educational programs to help people in its region receive justice, protect their well-being, and support opportunities to overcome poverty. It serves 48 counties from offices in Clarksville, Columbia, Cookeville, Gallatin, Murfreesboro, Nashville, Oak Ridge, and Tullahoma. Legal Aid Society is funded in part by United Way. Learn more at las.org or by following the firm on Facebook.
Photo: Rae Anne Smith
