Expert: Michael Brotherton - 6/14/2007

Question
We were involved in a mortgage fraud situation where we were "straw buyers"
on some Florida property.  All six of our properties are now in forclosure.  All
of the mortgages were "no doc" loans.  We found out later that the homes
were overappraised.  
Our question is:  How likely is it that the mortgage companies will pursue
deficiencies on the properties?  All of the homes have far less value than the
mortgage balances.  What complicates things is that all the homes have
second mortgages.  So we have the companies that hold the second
mortgages who are the most vocal right now in collection activity.  We have a
large investor who is working to buy these homes and negotiate with the
mortgage companies, but not sure if an agreement can be reached.  There
was about 70 properties involved in this scheme.
We are current on our present home in Michigan, but only have about 30%
equity in our home.  Can they put a lien on our home?

Answer
This is a complicated matter. You really need legal counsel. They very well could pursue deficiency balances but your problems may be a bit more than that. You may be a victim but the lenders may attempt to make you one of the fall guys. They may attempt to say that you were fully aware of what you were doing. My question is, how did the second mortgage lenders make their loans knowing the properties were over encumbered?

You may be able to sue them if you can prove you were a victim but you need to seek legal counsel. Talk to at least 2 maybe 3 attorneys experienced in mortgage fraud.

If there are more victims you may have a class action suit. You may also try to prosecute the seller and other persons involved.

If you do nothing they can attach your home and other assets and could pursue collection, possibly force you into bankruptcy. Don't let this go without talking to an attorney it appears to be much more serious than you might think.