Why you should never own your property free and clear
March 9th, 2007 by KenricConvention wisdom says that you pay down your mortgage and own your own home. To most people, a home that is totally paid off is great peace of mind. So, why would I be telling you to never own it free and clear?
The reason is because a free and clear home is very easy to steal.
Most homeowners really do not understand the process of owning a home. When you buy a home, your purchase gets recorded and the county recorder’s office. A few months later, you probably recieved something like this:
If you were like me 8 years ago, you just filed this sheet of paper in with your mortgage documents. This document basically says that you are the owner of your home and that it has been recorded at the county.
If you have a mortgage on your home, this mortgage is also recorded at the county and another other loans such as 2nd mortgage, HELOC, liens, etc…
The scammers will go and apply for a cashout refinance loan on your home. They go through the standard loan process and get a nice check at closing and disappear. Meanwhile, two months later you get a foreclosure notice at your home because you’ve failed to make the mortgage payments. This is usually the first time the homeowner finds out they’ve been scammed.
By simply having a loan on your house, the bank will be watching your home. They have a huge interest in making sure nothing happens to it. First, since you have a loan, there may not be much equity to pull out for the scammer. The scammers usually target free & clear homes. Second, when the home’s ownership changes, the bank will be notified. This may lead them to investigate further or they may ask you to add this new owner as an additional insured on your insurance policy. In any case, anyone with interest in the home gets notified (except you).
If you do own a home free & clear, all you need to do is get a HELOC and never use it. Or you can set up a mortgage LLC and write yourself a loan.
Another added step is to tell your insurance agent to contact you whenever anybody inquires about your homeowner’s policy. Remember, in most cases, you cannot close on a loan until you have insurance. Therefore, the banks will call and verify insurance coverage before they issue the loan. If your insurance agent does not give them any information, they won’t issue the loan.
Here is a forum thread about this topic: Stealing Houses
Here are some news stories about this:
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I’m absolutely stupified.
You would think this document, transferring ownership of a house, would require a notary or something.
By Clifford on Mar 9, 2007
It does require a notary, but you can get a fake notary stamp or include the person in on the scam.
By Kenric on Mar 9, 2007
the title insurance should cover this.
the lender would require the fraudulent conveyor to get it. so when the original home owner filed a claim, the title insurance company would have to cough up the dough to pay off the lender.
By Adventures In Money Making on Mar 20, 2007