If you are behind on your mortgage payments and the bank forecloses on your home, the lender is entitled to recover what is owed, but they are not entitled to anything more than that. Unfortunately, we are seeing many cases in which scammers and predatory lenders are trying to steal surplus equity from innocent homeowners facing foreclosure.
In some situations, banks or investors are taking advantage of the fact that many homeowners don’t know they are entitled to surplus equity or what actions they need to take to claim it, and are keeping it for themselves. In other cases, predatory lenders never list the home for sale. Instead, they are “selling” it to themselves at an extremely low price and keeping the home and its equity for themselves, without the homeowner realizing it.
In this article, we’ll explain how predatory lenders are stealing homes and surplus equity through fraudulent transfers, so you know what to look out for.
If you believe your lender didn’t properly sell your home at a sheriff’s sale, you may have grounds to sue for surplus equity you are entitled to. Contact Denbeaux Law today to schedule a free consultation to review your situation.
What Is A Fraudulent Foreclosure Transfer?
In a typical foreclosure, the bank will sell the home at a sheriff’s sale. The goal is for the house to sell for as much as possible so the lender can recover what is owed. If the home is sold for more than what is owed (including the loan balance, interest, and fees), the homeowner is entitled to the remaining balance, known as surplus equity.
A fraudulent foreclosure transfer happens when the lender refuses to sell the home at a sheriff’s sale or on the open market. Instead, they sell the property back to themselves at a very low price that they choose, such as $100. In this scenario, the bank keeps the property and its full value for the low price, robbing the homeowner of any surplus equity they may have been entitled to.
In some cases, the lender will tell the homeowner there was no surplus equity, but it is often not true. Without having a sale, there is no way to determine how much, if any, surplus equity would be owed to the homeowner. Predatory lenders rely on homeowners not knowing this, and that is how they steal their surplus equity.
How Fraudulent Transfers Hurt Innocent Homeowners
Not every home sold at a foreclosure sale will have surplus equity, since surplus equity only exists if the home is sold for more than the amount owed. However, for that to be determined, the home must be sold at a price that reflects its fair market value.
Typically, this is determined by a sheriff’s sale, and the price it sells for reflects what the market is willing to pay. But if the property is never put on the open market with bidding, there is no way to know its true value, and the fair market value cannot be determined. And if the fair market value cannot be determined, there is no way to know how much, if any, surplus equity exists.
Here is an example of how this can happen. Let’s say a homeowner owes $100,000 to their lender. If the home is sold at a sheriff’s sale and exposed to the market, buyers bid on it, and it may sell for $300,000. In that scenario, the $200,000 difference would be surplus equity that belongs to the homeowner. However, if the lender refuses to sell the property in the open market and instead sells it to itself for a low price, such as $100, there is technically no surplus equity because the “sale price” of $100 is less than the $100,000 owed.
By refusing to sell the home at a sheriff’s sale, the bank not only leaves the homeowner without their home, but also denies them any surplus equity that may exist.
Contact Denbeaux Law Today
Most homeowners assume their property will go through a sheriff’s sale, but predatory lenders don’t always follow the rules. Unfortunately, by the time most homeowners realize something is wrong, the lender has already transferred the home to themselves, and the equity is gone.
Recovering that equity after the transfer can be difficult, which is why it is important to understand what to look for. If this has happened to you, you may still have options to recover what you are owed. Contact Denbeaux Law to schedule a free consultation and review your situation.
