North Carolina AG Adds Rent Skimming Rackets, "Subject To" Deed Conveyances To Its "Foreclosure Rescue" Radar

In Charlotte, North Carolina, The Charlotte Observer reports:

• Like others across North Carolina, [77-year-old Ruth Barbour] fell victim to a type of mortgage scheme that's become more common as businesses target homeowners desperate to get out of their houses. [...] The businesses, which say they buy and close on homes quickly, have captured the attention of state regulators and legislators, who are now considering legislation that would make tracking these cases easier.

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• Typically, this is how the scheme works: A distressed homeowner, who can't sell his house and may be facing foreclosure, agrees to sell his home to a company in exchange for a small cash settlement and the title to the house. The homeowner doesn't realize he is still named on the mortgage. The company brings in a renter, who pays a significant deposit. The company may or may not continue to pay the mortgage. When it can no longer find a renter, it abandons the property, for which the original homeowner is still liable.

• It's the latest in a number of schemes that regulators are battling as distressed homeowners look for a way out of an overwhelming mortgage or impending foreclosure. The N.C. Department of Justice has been cracking down on foreclosure “rescue” outfits that require an upfront payment and promise to work with a lender to modify a delinquent loan. Now it's also taking aim at businesses that promise to take over mortgage payments if the homeowner signs over the deed or title (ie. deed conveyances that are "subject to" one or more existing mortgages on the home being deeded over).(1) About four dozen of these businesses, which sometimes use the slogan “We Buy Homes,” operate in Charlotte and around the state, according to the Better Business Bureau of Southern Piedmont.

For more, see Home scam stings owners (Businesses advertise as buyers. They take over a home's title but not the mortgage, and some can leave distressed owners in foreclosure).

(1) Typically, these transactions are consummated without regard to any "due on sale" restriction that may be contained in the existing mortgage(s) that the property is subject to, and sometimes involve transfers to a newly formed trust in an attempt to conceal the deal from the existing lenders as long as possible.