# Mortgage Cancellation **URL:** \ **Category:** Factual Questions\ **Created:** [August 18, 2003, 7:12pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021 "2003-08-18T19:12:22Z")\ **Posts on this page:** 18\ **Page:** 1
**Author:** ![LeftHandofDarkness](https://avatars.discourse-cdn.com/v4/letter/l/c57346/32.png) [@LeftHandofDarkness](https://boards.straightdope.com/u/LeftHandofDarkness)\ **Post date:** [August 18, 2003, 7:12pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/1 "2003-08-18T19:12:22Z")
Long time fan first time poster… There’s a new fad sweeping through my office called mortage cancellation. A whole group of people are convinced that it’s the greatest thing since the invention of the wheel. Example: [http://www.mortgagealternative.com/](http://www.mortgagealternative.com/) Essentially through some quasi-legal voodoo you can buy a house with a mortgage of 250k go through this process and have the mortgage annulled, ending up with a 250k house that you completely own, while someone other than you ends up taking a 250K loss. It obviously falls into the “sounds to good to be true probably is category.” But the mere fact that someone would claim to be able to do something so outrageous is unfathomable. My curiousity raging I came to the fountainhead of all truth. Can somebody help me out? What kind of scam is this? ---
**Author:** ![FatBaldGuy](https://avatars.discourse-cdn.com/v4/letter/f/ecd19e/32.png) [@FatBaldGuy](https://boards.straightdope.com/u/FatBaldGuy)\ **Post date:** [August 18, 2003, 7:45pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/2 "2003-08-18T19:45:40Z")
Welcome to the boards. I am not familiar with this particular scam, but the one thing that jumps out at me from reading their explanations is the notion that the banks are creating value from nothing (or from your mortgage agreement). The only reason the mortgage agreement has any value is that it represents a promise (by you) to pay the amount of the loan, plus interest. That’s the reason they can sell it to other institutions, etc., because it has a future value. If you default on your loan, whoever is holding it at the time has lost money. I can’t imagine any of their “legal” tactics holding up under scrutiny. ---
**Author:** ![toadspittle](https://avatars.discourse-cdn.com/v4/letter/t/c0e974/32.png) [@toadspittle](https://boards.straightdope.com/u/toadspittle)\ **Post date:** [August 18, 2003, 8:43pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/3 "2003-08-18T20:43:24Z")
The scariest line in this whole thing: > [@](#): > > You will need to sign a Limited Power of Attorney agreement so that we can represent you in dealings with your bank or mortgage company. Be very, very wary. In short, though, here’s what they seem to say is happening: a) you buy your house w/ a mortgage b) you pay this co. $1995. c) this co. buys out your mortgage from the bank (“In exchange for your debt we offer your lender a new asset of equal value.”) d) you pay this co. an addl. 15% of the value of your house WITHIN 45 DAYS (delays would presumably result in foreclosure, and they’ll own your home outright) e) you take out a home equity loan to pay back the 15% you owe the company. For some reason, they advise you take out 80% of the home’s value, and say “Note: Assistance with refinancing is available.” My guess is that this co. will offer to be your lenders, so instead of paying a bank, you’ll be paying this company. Probably at worse rates than for a mortgage, too. I wouldn’t be surprised if there were some sort of timing shenanigans in there, too (like how soon the equity in the house is yours, what happens if the paperwork is “accidentally” delayed by this co., etc.). ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [August 18, 2003, 8:50pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/4 "2003-08-18T20:50:01Z")
A fool and his money are soon parted. > [@](#): > > Cost: There is an application fee of $1995.00 to begin the process, and a service fee of 15% of the discharged mortgage once it has been eliminated. The service fee is payable within 45 days after discharge of your loan. > > The Good News: Once your mortgage has been discharged you will be able to refinance your property based on a clear title, to get money for the 15% service fee plus paying bills, buying a car, or whatever you wish. > > The Better News: You are allowed to go through the process twice per property. If you think you can stiff the bank out of the money they lent you then you deserve to be stiffed out of $1995. ---
**Author:** ![LeftHandofDarkness](https://avatars.discourse-cdn.com/v4/letter/l/c57346/32.png) [@LeftHandofDarkness](https://boards.straightdope.com/u/LeftHandofDarkness)\ **Post date:** [August 18, 2003, 9:17pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/5 "2003-08-18T21:17:22Z")
I couldn’t agree more and that’s what I’ve been trying to tell my co-workers, but several of them a reasonably far along in the process i.e. they’ve already paid the $2000 or however much it is. Which is one of the interesting things about this is that there is more than one “company” (band of crooks) offering this service. What is particularly humorous is when I talk about the collapse of the US real estate market (conceivably dominoing into the entire US ecomony and then the world) if this actually was legitimate and widespread, and they just give me this look like how could you doubt.:rolleyes: Or you just haven’t researched it enough… _sigh_ I guess what also surprises me is that there isn’t more to be found about it on the web. Which leads me to believe that’s it’s a scam which is still in it’s infancy… ---
**Author:** ![astro](https://avatars.discourse-cdn.com/v4/letter/a/9dc877/32.png) [@astro](https://boards.straightdope.com/u/astro)\ **Post date:** [August 18, 2003, 9:41pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/6 "2003-08-18T21:41:34Z")
One version of the mortgage cancellation scam(s) seem to be predicated on the notion that there is some built in obscure legal or contractural flaw in many standard bank mortgage contracts that will allow a legal challenge to, and potential nullification of, the mortgage if the charge of “fraud” is pressed using certain mysterious legal techniques that will cause the bank attorneys to throw their hands up in the air. There might, in fact, be a few banks that have done this if the remaining value of the mortgage was not worth the legal hassle, but to bet on this as a guaranteed procedure is retarded, and to pay anyone big dollars in advance, or throught the process, to pursue this for you borders on criminal stupidity. See $$$ Own Your Home Debt Free! $$$ > [@](#): > > It’s important to note, this administrative procedure carries a powerful punch and lethal blow right to banks bottom line on the issues of ethics, morality, contract fraud and misrepresentation. By using the letter of the law, your mortgage can be legally canceled… freeing you of any outstanding balance the banks presently claims you owe. In fact, it surprises most people that the law is on their side and favors the cancellation of the mortgage. It’s all in the contract you signed. The bank actually fails to meet certain specific lending requirements. This failure can constitute fraud and affects the contract, bill of sale, deed of trust and the process and manner of funding the loan which makes it possible for the process and program to legally cancel the balance of your mortgage. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [August 18, 2003, 11:26pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/7 "2003-08-18T23:26:39Z")
> [@](#): > > \*Originally posted by LeftHandofDarkness \* > I couldn’t agree more and that’s what I’ve been trying to tell my co-workers, but several of them a reasonably far along in the process i.e. they’ve already paid the $2000 or however much it is. You’ll have the last laugh. Just make sure to follow up. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [August 19, 2003, 2:52am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/8 "2003-08-19T02:52:36Z")
I agree with sailor. Your cow-orkers are likely to get taken to the cleaners on this one. I wouldn’t have thought that “Pay me 2 grand and I’ll help you steal that guy’s money” would be an especially productive angle to try to work. Shows how much I know. Let us know if/when anything further develops. ---
**Author:** ![Ringo](https://avatars.discourse-cdn.com/v4/letter/r/779978/32.png) [@Ringo](https://boards.straightdope.com/u/Ringo)\ **Post date:** [August 19, 2003, 3:03am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/9 "2003-08-19T03:03:44Z")
Sounds a bit like the Nigerian scam has been Midwesternized. ---
**Author:** ![suezeekay](https://avatars.discourse-cdn.com/v4/letter/s/839c29/32.png) [@suezeekay](https://boards.straightdope.com/u/suezeekay)\ **Post date:** [August 19, 2003, 4:30am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/10 "2003-08-19T04:30:59Z")
Can you follow up and let us know what the outcome was for your co-workers? I’m really curious to see how this comes out. ---
**Author:** ![aahala](https://avatars.discourse-cdn.com/v4/letter/a/a88e4f/32.png) [@aahala](https://boards.straightdope.com/u/aahala)\ **Post date:** [August 19, 2003, 5:03am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/11 "2003-08-19T05:03:34Z")
I can save Lefty’s coworkers some money - just send me a $1,000. And they won’t have to wait 45 days to know the final result. I promise to cash the check the day I get it. ---
**Author:** ![Princhester](https://avatars.discourse-cdn.com/v4/letter/p/3e96dc/32.png) [@Princhester](https://boards.straightdope.com/u/Princhester)\ **Post date:** [August 19, 2003, 8:09am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/12 "2003-08-19T08:09:02Z")
What a joke. All that they are ultimately saying is that they will pay out your mortgage loan for $2000 plus 15% and of course what they then fail to mention is that you will owe them, instead of the bank. So you will just have exchanged one lender for another, and paid a great whack to them in the process. They suggest that you then refinance using the equity you now have in your home. I suspect that they suggest this because it is shortly after you do so that they give you the bad news: you have no mortgage, but you owe the scammers the money and they want it: so you use the refinance monies to pay them. And of course they offer to arrange the equity loan themselves: in other words they hope that real suckers will end up with a mortgage owed to them, rather than to the original bank, and that they will have collected $2000 and 15% along the way. ---
**Author:** ![astro](https://avatars.discourse-cdn.com/v4/letter/a/9dc877/32.png) [@astro](https://boards.straightdope.com/u/astro)\ **Post date:** [August 19, 2003, 2:29pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/13 "2003-08-19T14:29:26Z")
Here’s another favorite mortgage con the [Cash out Re-finance Scam -](http://www.mtgprofessor.com/A%20-%20Scams/the_cash-out_refinance_scam.htm) > [@](#): > > Beneficiaries of the HFH program must have below-average incomes and must contribute a certain number of hours of labor to the construction or rehabilitation of their house. The lure is that they are able to buy a house at a knock-down price, and to finance it with a 0% mortgage. You can’t get a better mortgage than that. Yet a minority of them foolishly agree to refinance it into a mortgage carrying a high rate – 14% is a typical rate on these deals – because they are offered cash in their pocket, and sometimes a lower monthly payment. > > Here is an illustration of how this scam works. The house provided by HFH is worth $90,000 and HFH has arranged for a 0% loan of $48,000 to be paid back in monthly installments of $200 over 20 years. Under the refinancing, the loan amount is raised to $78,000, with $48,000 repaying the old loan, $10,000 covering loan fees, and $20,000 going into the owner’s pocket. The monthly payment on the new loan is only $150. Getting $20,000 in cash plus a lower monthly payment makes it look like a can’t-lose deal to the owner, who doesn’t understand what ownership means. > > The sad fact is that the owner has traded $42,000 of equity – a house worth $90,000 less the mortgage of $48,000 – for $20,000. The new mortgage has a rate of 14%, which is typical for deals of this type, and a balloon payment equal to the unpaid balance is due after 2 years. Since the $150 payment falls well short of the interest, the loan balance the owner is obliged to pay after 2 years will grow to almost $99,000. At that point, the owner will lose the house. ---
**Author:** ![SnoopyFan](https://avatars.discourse-cdn.com/v4/letter/s/d07c76/32.png) [@SnoopyFan](https://boards.straightdope.com/u/SnoopyFan)\ **Post date:** [August 20, 2003, 8:07am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/14 "2003-08-20T08:07:44Z")
LeftHand if I were you I’d watch my back around these people. Is it me or have they proven that they’re, well, thieves? ---
**Author:** ![lucwarm](https://avatars.discourse-cdn.com/v4/letter/l/e19adc/32.png) [@lucwarm](https://boards.straightdope.com/u/lucwarm)\ **Post date:** [August 20, 2003, 1:27pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/15 "2003-08-20T13:27:45Z")
I checked out that web site – what a crock. > [@](#): > > If a promissory note is designed to circulate as money, like money it can be deposited into a checking account, can’t it? You bet. > > That was never disclosed in the bank loan agreement, was it? No. When I signed a mortgage and promissory note, the documents were very clear that the bank had the right to assign them. I imagine that most mortgages and notes have this feature. > [@](#): > > Since the promissory note is a negotiable instrument, per the Uniform Commercial Code, at what point did the bank “own” the promissory note? When it was signed and delivered to the bank at the closing. > [@](#): > > When the bank deposited the note, the entire cost of the loan was funded by you, and you’re now supposed to pay them? That’s not what you agreed to, is it? It’s exactly what I agreed to. The bank cut a large check to the seller of the house; the seller gave me a deed; and I agreed to pay the bank (or its assigns) monthly for 30 years. ---
**Author:** ![LeftHandofDarkness](https://avatars.discourse-cdn.com/v4/letter/l/c57346/32.png) [@LeftHandofDarkness](https://boards.straightdope.com/u/LeftHandofDarkness)\ **Post date:** [August 21, 2003, 2:04am UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/16 "2003-08-21T02:04:29Z")
I guess what led me to post here in the first place was that despite my best efforts to ferret out the truth of this matter myself I came up with nothing conclusive. No web page that said “this is a classic pyramid scheme” or “this is a scam that ends up with the participant holding a 18 APR mortgage”. Which leads me to think that we’re seeing a nascant scam. Something that 20 years from now people will talk about mortgage cancellation they same way they talk about e-mails from Nigera, but which right now hasn’t reached the critical mass necessary for anyone to take it seriously. In any event I will be following this very closely and I will certainly post again when it comes to it’s expensive conclusion… 😉 ---
**Author:** ![mark24c](https://avatars.discourse-cdn.com/v4/letter/m/f04885/32.png) [@mark24c](https://boards.straightdope.com/u/mark24c)\ **Post date:** [April 13, 2013, 9:07pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/17 "2013-04-13T21:07:39Z")
What happened here? ---
**Author:** ![Earl\_Snake-Hips\_Tucker](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/earl_snake-hips_tucker/32/3269_2.png) [@Earl\_Snake-Hips\_Tucker](https://boards.straightdope.com/u/Earl_Snake-Hips_Tucker)\ **Post date:** [April 13, 2013, 9:45pm UTC](https://boards.straightdope.com/t/mortgage-cancellation/196021/18 "2013-04-13T21:45:39Z")
Looks like we’re still waiting for him to post what he found.