“Here’s what you do: When you know your home is going to foreclosure, you lease it to a confederate at below-market rates. Make the lease term the longest you think you can get away with. At least a year should be good in all jurisdictions, some might allow more. Instead of moving in, the confederate lets you stay there instead. You kick the rent back to them, perhaps with a little sweetener to maintain their cooperation. When the place is foreclosed, Fannie Mae allows the renters (theoretically your confederate, but actually you) to stay on. You stay in the same house for an extra year, at significantly reduced cost.
Example: You owe $3500/mo for your mortgage. You stop paying. At the latest acceptable time prior to the trustee sale, you sign a lease with your brother-in-law. Market rent is $2200/mo, but you lease it to him for $1600. You pay him the $1600 back each month plus $200 for his consideration. Effectively your total rent is $1800/mo. In one year you save over $20K vs. paying your mortgage, and $4800 vs. moving out and renting an equivalent place the normal (legal) way. If your confederate doesn’t need to be paid (e.g., your parents, someone who owes you favors, false identity you concocted, etc.), then you save even more.
If you had the foresight to combine this with a couple of years of neg-am payments on your option ARM, followed by a slow foreclosure, you could end up having lived in a swell place for several years at below-market rates. The easy credit years just keep on giving.
(NB: the above does not in any way constitute an endorsement of the shameful and illegal practices mentioned.) “
