I have been totally wiped out by the financial crises and have huge debts. I am an American overseas, and I know nothing about real estate and have never owned a home, but I was approached by a friend in America who was very savy with finance, much older, and in a bad financial situation and he said he had a way to help us both out.

He had a house in the south which had no equity in it, (because he had refinanced it to the hilt). However, he said that he could get it reappraised (and he did at the end of 2008), and that he would sell it to me for the new reappraised price. We would get a loan for the higher amount, and split the profit from the loan money (the difference between the old price and the new price) between us. The house was already rented, and it so happens that the new higher monthly payments on the new loan would still be covered by the payments the tenant was making. So for example, he bought the house for 150,000, and then he got it reappraisted for 190,000 (I can’t understand for the life of me how he did this in a down market, but I just followed his instructions. I wonder now if he did this illegally), so we took out the new loan for the higher reappraised amount of 190,000 and were supposed to split the difference of 40,000. The tenant continued to live there and make the monthly payments which covered the mortgage payments on the new loan.

While we were going through all of the closing procedures (it took him a long time to find a bank that would do it, many months in fact), he asked me to advance him thousands of dollars for various payments he had to make on his other properties. I did so, because he promised me that he would return the money, plus the 20,000 dollars (50% of the profit) to me. He is elderly, and he was like my Dad. He had suffered a heart attack at one point in the past, and I went to America to take care of him at the hospital. He seemed so caring, and so experienced in real estate, that I just believed him and did what he said.

However, at the last minute, and when the house was about to close, he told me it was an FHA loan. I had to sign a paper saying I would be living in the house. I told him this was not right because there was a tenant there, and it was illegal. He told me that that was the only loan we could get and if I didn’t sign, he wouldn’t be able to pay me a dime because the whole deal would collapse. I was so nervous, and I desperately needed at least the money I had loaned him back because where I am living overseas, not paying on your debt lands you in jail, which also means I would have lost my job, and then you are really in trouble because you can’t pay anything. You could sit in jail a long time. I also couldn’t leave this country because they have "temporarily" blocked my exit at the airport because of my debts (I didn’t do anything illegal, other than fall into debt due to a business that collapsed). I am stuck here, it is hard to believe, but believe me, it is true. The American Embassy can’t do anything to help people like me.

So, facing the prospect of going to jail for a number of years over here, I signed the papers, and the loan closed. I hated making this decision, but what could I do. It was the hardest ethical decision of my life, and I totally regret it.

To my utter disbelief, after the loan closed my "friend" made off with the entire 40,000, and left America to start his retirement overseas. My pleas to him on e-mail were met with lines such as "this is your problem not mine." Eventually he stopped writing to me, telling me I was foolish and didn’t understand the world of finance. He turned from a sweet older man, into a nasty swindler.

The house started to have problems–unexpected expenses, and then, the worst luck, the tenant stopped paying. She is a number of months behind in her rent, but I let her stay, partly out of pity for her (she came into the rental office crying), and also because it would be so hard to find a new tenant and start over.

I have continued to make up the shortfall from the tentant on the mortgage for a number of months because I am afraid that if it goes into forclosure, it will be discovered that it was an FHA loan, and there was and is a tenant living there. But I am running out of funds, and now I am only one month from foreclosure (however, the tenant did start to pay, and she says she will get caught up–one bright note).

I really want to get rid of this house and I’m so depressed about what this friend did to me. I can’t afford these monthly payments. But what are the consequences for me if I cannot pay anymore and it goes into foreclosure? Should I evict the tenant so that the house looks empty, and then try to sell it (very hard to do), or the other option–go into foreclosure? (I know it is a black mark on your record, but I don’t think I will be living in America again until I am 60 or 65). I really hate to do this to her, but she has also been delinquent, and I am