Keep Renting Your Boston Apartment

Local news gave us another reason to keep renting your Boston apartment instead of jumping prematurely into home or condo ownership. Michael David Scott was indicted last Thursday on 62 counts of bank fraud, wire fraud and money laundering in a real estate investment scheme. He is accused of falsifying borrower’s mortgage application information so that they could buy investment condominiums from him in Roxbury and Dorchester.
 
Scott and his colleagues purchased 50 buildings in low income neighborhoods for $26.6 million between 2004 and 2008. They converted the apartments into 169 condominiums, which they sold for nearly $50 million. According to purchasers, Scott promised that rent from these condos would cover their mortgages while they’d continue to build equity. Purchasers said they handed Scott signed blank mortgage applications and purchase authorizations. The scam worked until the market collapsed. More than a hundred of these units are now in foreclosure.
 
The victims were hit hard. Most have modest income. Foreclosures stay on one’s credit report for seven long years. At least the Commonwealth doesn’t allow deficiency judgments where a lender can still pursue a borrower for the balance owed on a home after a public auction.
 
Since Scott’s alleged malfeasance, Massachusetts has reformed its mortgage process by:
• Prohibiting the signing of incomplete or blank loans applications.
• Outlawing any income misstatement on a loan application.
• Putting an end to any misrepresentation or omission on behalf of the loan originator regarding the terms of a mortgage.
• Requiring the licensing of mortgage brokers, with a minimum of three years experience and five years for lenders. (Since the law took effect on July 1, 2008, of the 7,700 applications received, less than 6,000 were approved.) Massachusetts is now a participant in the state supervision represented by the Nationwide Mortgage Licensing System.
• Mandating that in mortgage advertising, the type and license number must now be disclosed.
 
The tale should be a warning to renters: Don’t rush to buy. Credit has tightened. Down payments have increased. There is no longer a homebuyer’s tax credit. If you’re renting now, use that time to put money aside for an eventual home purchase, but don’t be lured by false promises. Compared to owning a home in these uncertain times, renting might still make the most sense for you.