While it can take different forms, what we are seeing most often in Maryland these days involves 5 players: 1) a victim in foreclosure who has lots of equity in their home, usually between $100,000 and $300,000; 2) a mastermind con artist who swoops in and promises the help the homeowner "save their home" by arranging a refinacing loan; 3) an "investor" also known as a "straw purchaser" who is recruited by the master con artist and promised that they will be paid $10,000 or more for doing no work; 4) a title company which is either actively involved in the fraud or at a minimum negligent in performing its duties; 5) a new mortgage lender which is often negligent and sometimes complicit in the fraud.
Here is how it works:
1) You are a distressed homeowner who is behind in your mortgage payments. Suddenly, the house is "docketed for foreclosure." Because Maryland is a "non-judicial foreclosure state" this means that your house could be sold on the auction block in as little as 15 days from when your lender "dockets" it for foreclosure.
2) Using the power of the internet, the mastermind con artist gets your name from a computerized listing of the foreclosure docket. Then, the mastermind goes to a different website to determine a) what your property is worth, and b) how much your mortgage is. The difference between what the property is worth and the balance on your mortgage is the "equity." So, if you owe $100,000 on your mortgage, but the house is worth $300,000, then you have $200,000 in equity. The con artist now has his or her mark: you. You are feeling very stressed and very vulnerable and the con artist now comes in and promises to "rescue" you from foreclosure and allow you to keep your home. This angel is going to get you a loan or some other form of creative financing which is going to allow you to avoid foreclosure and once again be able to sleep easily at night.
3) The con artist also recruits "investors". The job of the investor is to show up at the "refinancing" table. What really happens at the "refinance" is that you sign the Deed to your house over to the "investor." You also sign a "lease-back" agreement whereby you get to stay in the house, make "rental" payments to the investor and have the option to buy the house back after a year. But as part of the "refinancing" the "investor" takes out a NEW MORTGAGE for the full value of the property, and agrees to pay all but $10,000 of it to the master con artist. So your house, which had a value of $300,000 and a mortgage of $100,000 before the "refinance" now has a value of $300,000 and a NEW MORTGAGE of $300,000. So, your equity of $200,000 has been "stripped" away by the con artists. Even if you were able to buy the house back after a year, it would be a house in which there is NO MORE EQUITY.
4) You never actually get to buy the house back, because the "rental" payments you "agreed" to are much higher than the mortage payment was. Typically, the "rent" is between 2 and 3 times what your mortgage payment was. Instead, you default on the "rental" payments, and the "investor" goes into Landlord-Tenant court and tries to have you evicted from the house, thus completing the fraud. First they take your title, then they take your equity, then they take the house. A variation on this theme is that the "investor" simply never pays the NEW MORTGAGE and therefore the new mortgage company starts an entirely new foreclosure proceeding, and you are eventually forced to leave by the new mortgage company.
So, according to this scam which is taking place across Maryland and indeed across the country, the foreclosure "rescue" does not save your house. You still lose the house. The only difference is, if you had simply let it go to foreclosure, you would have walked away with the equity in your house. But under the foreclosure rescue scam, the con artists get your equity.
To combat this problem, the Maryland Legislature enacted emergency legislation effective in May of 2005, called the Protection of Homeowners in Foreclosure Act. This imperfect statute is at least a first step toward curbing these fraudulent, illegal and immoral practices.
How Widespread is this problem? The problem Foreclosure Rescue Scams is very widespread, and stretches all across this country.
Questions? Contact us.
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Holland's Consumer Video Guides: CARS
Here is something very refreshing: an honest car dealer who tells all! Watch these Video Guides to learn tips, tricks, and things to avoid when buying or financing a car. These Video Guides provide commentary by Peter Holland, and from a local car dealer.
AUTO SCAMS
CAR BUYER'S GUIDE
CAR LOANS
DRIVING A LEMON?
Think you've been scammed? Feel free to contact us.
AUTO SCAMS
CAR BUYER'S GUIDE
CAR LOANS
DRIVING A LEMON?
Think you've been scammed? Feel free to contact us.
Spot Delivery: The Problem With Yo-Yo Sales
Yo-Yo Sales: Why are they so wrong?
Chances are, if you financed your car through a Maryland car dealer, they had you to sign a "contingent delivery agreement" or "spot delivery agreement" or "bailment agreement" or some similar nonsense sounding document that was not explained and/or you did not understand. Spot delivery means delivery today, now, on the spot. The dealer practically forces a car on you, and insists that you take the car home today. But they are not going to let you drive over the curb until, buried in the paperwork, you sign their spot delivery agreement saying that if and when they call, you will come back with the car.
What do these "agreements" mean? Typically, they contain words to the effect that if the dealer is not able to sell your financing contract to a lender on terms acceptable to the dealer, then the dealer gets to call off the deal and force you to return the car, and pay for the mileage you put on it. Plain English Translation: the bank did not offer them as much money as they wanted for the contract, and they have changed their mind. But wasn't it a done deal, you ask? The short answer is YES, but not in the dealer's mind. (More on that below. But first, Did you know: usually when the bank takes the "assignment" of the contract, the dealer gets money back from the bank? This is because the interest rate on the "buy rate" that the bank pays for the financing contract is far less than the "sell rate" -- the interest rate the dealer gave you. This "yield spread" is often as much as TWO PERCENTAGE POINTS OR MORE. So, if you thought the dealer was shopping the banks to get you the best deal on financing, you would usually be wrong -- they are often shopping to see which bank will give them the biggest payback.)
Of course, the "spot delivery agreement" just creates the opening for the dealer to ask for more money. For example, they might say: "Your financing was not approved. We need you to either give us another $1,000 as a down payment, or else you are going to have to turn the car in." Or, they will say: "The financing fell through. We need you to come in and sign another contract." Hence the term "Yo-Yo Sale." They pull you back into the dealership almost as fast as they threw you out in that new car that they insisted that you drive off the lot today in the "Spot Delivery."
But wait -- didn't you already have a deal? Not so, says the dealer -- they changed their mind. Well, do you think that you, the consumer, could change your mind? Do you think you could just call them up and say: "I think I paid too much for this car, so either you will have to give me $1,000 back, or else I am bringing the car in and unwinding the deal." Well, faster than you can say "Yo-Yo Sale" they would remind you that right on the face of the contract it says that there is NO COOLING OFF PERIOD.
Check your paperwork. If you signed a spot delivery document, you should report it to the Maryland MVA and to the Consumer Protection Division of the Maryland Attorney General's Office. And if you are being harassed by a dealer to bring the car back, contact the MVA immediately and consider seeking legal advice. Why? Because since at least 1980, the Maryland MVA has been telling its car dealers not to use these so-called "agreements." Here is what the MVA said in their March 10, 2005 Dealer Bulletin No. D 03-05-01:
"Temporary registration permits, or certificates and plates, may not be used by dealers in cases where vehicles are released to potential purchasers prior to consummation of a vehicle sales transaction. These types of transactions are commonly referred to in the industry as "Spot Delivery," "Fronting" "Macarthur Statement," etc.
Maryland Vehicle Law and Agency Regulations provide for issuance of types of temporary registrations only in the case of bona fide sales. As this Administration has advised in previous Bulletins, a bona fide sale exists only after all financial arrangements and any other prerequisite conditions have been met. Until such time, there has been no sale and temporary registrations may not be issued....
Complaints about spot delivery have been the result of "Supplemental Contracts" that are added to finance contracts stating financing has not been finalized contrary to agency regulation. Dealers are advised not to use these "Supplemental Contracts", which have resulted in financing at higher rates than originally contracted, and failure to return deposits, and failure to return trade-in vehicles."
Bottom line: if the dealer gave you temp tags and you drove the car off the lot, there was a bona fide sale, and according to the MVA, they can't now say otherwise.
So, how can you avoid getting taken to the cleaners? Its simple: get your financing pre-approved by a bank or credit union, and don't do a "Spot Delivery" and don't ever sign a "Supplemental Contract", no matter what it is called. You wouldn't take possession of a new house before your mortgage was approved, would you? Well, the same logic applies here: don't take possession of a car until the financing is approved. And if they give you those temp tags and tell you to take the car home, then don't sign any spot delivery agreement.
So, what is the best way to know the financing is approved? Answer: avoid the dealership financing and go to your bank or credit union and get pre-approved for an auto loan. That way, the only thing you will have to negotiate is the price of the car, and when you drive the car off the lot, you can rest assured that the dealer is not going to try to call and say: Yo-Yo: "your financing fell through."
If you have been a victim of a Yo-Yo scam, file a complaint with the Maryland MVA and with the Maryland Attorney General's Office. Also consider filing with the Federal Trade Commission and the Better Business Bureau. Here is how:
Maryland Attorney General Consumer Protection Division Complaint Form
MVA Complaint Form Against Car Dealer
File a formal complaint with the FTC
Better Business Bureau Complaint
Questions? Feel free to contact us.
Chances are, if you financed your car through a Maryland car dealer, they had you to sign a "contingent delivery agreement" or "spot delivery agreement" or "bailment agreement" or some similar nonsense sounding document that was not explained and/or you did not understand. Spot delivery means delivery today, now, on the spot. The dealer practically forces a car on you, and insists that you take the car home today. But they are not going to let you drive over the curb until, buried in the paperwork, you sign their spot delivery agreement saying that if and when they call, you will come back with the car.
What do these "agreements" mean? Typically, they contain words to the effect that if the dealer is not able to sell your financing contract to a lender on terms acceptable to the dealer, then the dealer gets to call off the deal and force you to return the car, and pay for the mileage you put on it. Plain English Translation: the bank did not offer them as much money as they wanted for the contract, and they have changed their mind. But wasn't it a done deal, you ask? The short answer is YES, but not in the dealer's mind. (More on that below. But first, Did you know: usually when the bank takes the "assignment" of the contract, the dealer gets money back from the bank? This is because the interest rate on the "buy rate" that the bank pays for the financing contract is far less than the "sell rate" -- the interest rate the dealer gave you. This "yield spread" is often as much as TWO PERCENTAGE POINTS OR MORE. So, if you thought the dealer was shopping the banks to get you the best deal on financing, you would usually be wrong -- they are often shopping to see which bank will give them the biggest payback.)
Of course, the "spot delivery agreement" just creates the opening for the dealer to ask for more money. For example, they might say: "Your financing was not approved. We need you to either give us another $1,000 as a down payment, or else you are going to have to turn the car in." Or, they will say: "The financing fell through. We need you to come in and sign another contract." Hence the term "Yo-Yo Sale." They pull you back into the dealership almost as fast as they threw you out in that new car that they insisted that you drive off the lot today in the "Spot Delivery."
But wait -- didn't you already have a deal? Not so, says the dealer -- they changed their mind. Well, do you think that you, the consumer, could change your mind? Do you think you could just call them up and say: "I think I paid too much for this car, so either you will have to give me $1,000 back, or else I am bringing the car in and unwinding the deal." Well, faster than you can say "Yo-Yo Sale" they would remind you that right on the face of the contract it says that there is NO COOLING OFF PERIOD.
Check your paperwork. If you signed a spot delivery document, you should report it to the Maryland MVA and to the Consumer Protection Division of the Maryland Attorney General's Office. And if you are being harassed by a dealer to bring the car back, contact the MVA immediately and consider seeking legal advice. Why? Because since at least 1980, the Maryland MVA has been telling its car dealers not to use these so-called "agreements." Here is what the MVA said in their March 10, 2005 Dealer Bulletin No. D 03-05-01:
"Temporary registration permits, or certificates and plates, may not be used by dealers in cases where vehicles are released to potential purchasers prior to consummation of a vehicle sales transaction. These types of transactions are commonly referred to in the industry as "Spot Delivery," "Fronting" "Macarthur Statement," etc.
Maryland Vehicle Law and Agency Regulations provide for issuance of types of temporary registrations only in the case of bona fide sales. As this Administration has advised in previous Bulletins, a bona fide sale exists only after all financial arrangements and any other prerequisite conditions have been met. Until such time, there has been no sale and temporary registrations may not be issued....
Complaints about spot delivery have been the result of "Supplemental Contracts" that are added to finance contracts stating financing has not been finalized contrary to agency regulation. Dealers are advised not to use these "Supplemental Contracts", which have resulted in financing at higher rates than originally contracted, and failure to return deposits, and failure to return trade-in vehicles."
Bottom line: if the dealer gave you temp tags and you drove the car off the lot, there was a bona fide sale, and according to the MVA, they can't now say otherwise.
So, how can you avoid getting taken to the cleaners? Its simple: get your financing pre-approved by a bank or credit union, and don't do a "Spot Delivery" and don't ever sign a "Supplemental Contract", no matter what it is called. You wouldn't take possession of a new house before your mortgage was approved, would you? Well, the same logic applies here: don't take possession of a car until the financing is approved. And if they give you those temp tags and tell you to take the car home, then don't sign any spot delivery agreement.
So, what is the best way to know the financing is approved? Answer: avoid the dealership financing and go to your bank or credit union and get pre-approved for an auto loan. That way, the only thing you will have to negotiate is the price of the car, and when you drive the car off the lot, you can rest assured that the dealer is not going to try to call and say: Yo-Yo: "your financing fell through."
If you have been a victim of a Yo-Yo scam, file a complaint with the Maryland MVA and with the Maryland Attorney General's Office. Also consider filing with the Federal Trade Commission and the Better Business Bureau. Here is how:
Maryland Attorney General Consumer Protection Division Complaint Form
MVA Complaint Form Against Car Dealer
File a formal complaint with the FTC
Better Business Bureau Complaint
Questions? Feel free to contact us.
Metropolitan Money Store
On March 25th, the ninth person indicted by the U.S. Attorney's Office in Greenbelt pled guilty in this criminal case. See http://baltimore.fbi.gov/dojpressrel/pressrel09/ba032509.htm
Beware of Yo-Yo Scams in Car Deals
Here is a video I just came across on YouTube which gives a great description of Yo-Yo scams and why they are so harmful to consumers. Click here.
For more on this deceptive practice, see the Blog Post on the Holland Law Firm website. Click here.
For more on this deceptive practice, see the Blog Post on the Holland Law Firm website. Click here.
Welcome
Welcome to the Maryland Consumer Law Blog. We hope that this Blog will become a resource for consumers and lawyers. We will try to focus on issues such as Auto Dealer Fraud, Wrongful Repossessions, Predatory Lending, Debt Collection Harassment and Foreclosure Rescue Scams. Please let us know if there are particular topics you would like to know more about.
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