Elderly mother served FC Auction notice,advice deeply appreciated

[Greg K.]

My mother bought a 2 family house for 514K back in 2006.  The mortgage was very complex and handled by the now defunct WMC(of GE), infamous for using scissors and xerox machines to fake documents, and anything else imaginable to get mortgages approved.

I believe it was something like a double mortgage to allow zero down payment, variable interest rate, and then went through a few re-assignments, with HSBC currently being the trustee of the note.  At the time I understood none of this, but assumed the responsibilities of managing the tenants in the other unit as well as maintenance, etc.

There were several hardships and she lost her job.  An attorney attempted to arrange a loan modification, and advised my mother to stop paying the mortgage payments.

One thing I did understand correctly was the gentrifying trend of the neighborhood, and the house has since appreciated in value to around 890K(adjusted comps analysis).  

The condition however has deteriorated and it's a very old house, I believe it to be worth closer to $700K at the moment.

A large and well known mortgage servicer was assigned to us, and they currently have the outstanding principal at $651K, but when I recently requested a pay off quote it came out to just about the same figure as what the house is worth, so, no equity.

My mother is 80 years old and English is not her first language.  She entrusted me to attempt to negotiate the selling of the house with a favorable outcome.

I went through two attempts to arrange a Short Sale with local investor that I found via loose social channels.  Interestingly, there have been several BPO's done, with walk through and everything, and the highest, and most recent value came in at ~580K.

The failed Short Sale was actually approved by the servicer for $480K.

I suspect this has to do with the Non-Performing status of the mortgage, my mother's age, and Massachusetts being a tenant/occupant friendly state.

I had to terminate the arrangement of this Short Sale when I finally acquired unbiased legal/realty counsel, and realized that the sizable return (700K - 475K = 225K) would not only be an act of fraud for us to receive, but that the buyer was likely misleading us into thinking we would get this money.

Since then, I really started doing my research, and am very interested in pursuing Real Estate Investing thanks to all of the hard lessons I've learned.

I organized an off market pool of cash investors, and showed the house and took offers.  At this time I have 2 VERY interested buyers one offering $700K , another offering $710K.  They both insist that there are creative ways to structure this deal so that me and my mother can LEGALLY , and secured by CONRACT, be able to collect the net proceeds, and split it 50/50 as her and I agreed from the start.

One of the proposed arrangements I researched and sought legal consul for, and am fairly certain would in fact still be an act of fraud.

A broker brought in an investor who proposed the idea of purchasing the Mortgage Note, and giving us the difference, secured of course in advance by a contract where we would agree to forfeit the Security(house) once the note was purchased.  This investor claimed to have a special standing that allowed him to be able to buy the note for about 50 cents on the dollar.  I do believe this approach is completely legal, but the more I attempt to research on the correct way to negotiate a note purchasing, the more confused I get.

Now, a few days ago we received a package that must have weighed 50 pounds, via certified mail, that HSBC will be holding a foreclosure auction in about 3 weeks.  One attorney said that it would be legal to arrange for one of my buyers to bid at the auction, and then we would forfeit our Homestead, vacate the premises in exchange for a net difference.  But I can't fathom any way of securing certainty that said buyer would not be outbidded by someone else, at which point the opportunity of course would be gone.

I've looked into a few other approaches, such as Short Payoff, and about to seriously look into bankruptcy.

My Goal:

Structure a deal that would allow me to comfortably situate my mother, and launch my own investment profile.

This is a very hot neighborhood, and most of the brokers and investors I've been talking to keep PROMISING that this would be a piece of cake.  But the possibility of being defrauded is not an option.  This is all we have.

Am I missing something more simple and obvious?  Can anyone offer some advice on how to proceed?

Thank you!