Many New York real estate owners face difficulties paying their mortgages. Unfortunately, there are individuals who know how to take advantage of such owners. One major type of mortgage fraud identified by the U.S. Department of Justice is known as a lease-buyback scheme. This involves a scammer convincing a property owner to transfer title to a third-party buyer. The buyer is actually a sham entity controlled by the scammer.
The scammer usually promises the owner that he or she can remain in the home while having an option to “buy back” the property at a later date. Meanwhile, the scammer is using control of the title to saddle the property with additional debt, thereby destroying its equity. The scammer typically bleeds the property dry and uses bankruptcy to avoid paying back the mortgage. The straw buyer may also receive a “kickback” in the form of the monies received from the original owner at closing.
Alleged Brooklyn Scammer Targets Church Minister
In 2011, the New York Daily News reported on one purported lease-buyback scammer operating in Brooklyn. The News said a 56-year-old single mother was lured into transferring title to her home because she needed help paying down her mortgage. Afterwards, the scammer allegedly tripled the mother's monthly rent payments, eventually forcing the family to move out.
The Daily News said this alleged scammer faced at least 36 civil cases against him. One such case was recently heard by Brooklyn Supreme Court. The defendant in this case is a minister who needed to refinance the mortgage on her building, which included her home and the religious school she operates. She agreed to sell the property to an LLC controlled by the alleged Brooklyn scammer. She said he assured her she would eventually be able to buy back the property.
But on the same day the defendant executed the sales contract, the alleged scammer took out a new mortgage on the property. She also claims he “wrongfully absconded from the closing, stealing over $200,000 of funds.” And after he failed to make payments on the new mortgage he took out, the mortgage holder moved to foreclose.
When the legal title holder failed to answer the foreclosure lawsuit, the minister joined the case as a defendant. She argued the mortgage was invalid because the deed transferring the property to the alleged scammer—the basis of the mortgage—was invalid. In March 2013, a Brooklyn Supreme Court judge granted the minister a default judgment, which rescinded the deed but did not immediately get rid of the new mortgage. Following additional litigation,another Supreme Court judge held on December 3 of this year the mortgage was not validly executed, and accordingly granted the defendant's motion to dismiss the foreclosure lawsuit.
Need Help from a Real Estate Lawyer?The above case illustrates the dangers of using a lease-buyback offer to refinance a mortgage or protect the equity in your property. If you are having legal issues with respect to residential or commercial property, the first thing you should do is contact a qualified New York real estate attorney who can provide you with independent, professional advice. Contact the offices of Waldhauser & Nisar, LLP, today to speak with someone about your case.