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MORTGAGE NEWS

Real Estate and Mortgage Scams Are Alive and Well

Written By:
November 28, 2011 at 2:56 AM

Predatory scam artists looking for new opportunities to prey on desperate homeowners have developed new, sneaky ways to deliver “foreclosure rescue” and “short sale relief” with the intention of milking homeowners out of thousands of dollars.

These predatory mortgage scams are becoming more and more commonplace, even as the housing market improves. Earlier this month a California woman pled guilty to felony grand theft in connection to a foreclosure relief scam aimed at Latino homeowners.

In Miami, Florida Imogene Hall was the victim of a combination of mortgage fraud, foreclosure rescue scams, title fraud and predatory lending. She told a local newspaper reporter that being an immigrant made her an easy target for scam artists. Hall lost her home and told the Miami Herald, “I’ve lived here since 1997. I lose so much sleep. I feel so bad. Everyone keeps telling me I shouldn’t cry, but I don’t know what else to do.”

Mortgage scams run far and wide. Even in beautiful Hawaii people are getting conned. Bruce Kim, Office of Consumer Protection executive director said, "Literally it's every day. Every day."

Kaneohe, Hawaii resident Isaac Deschamps said that after losing his job in 2009 he answered a direct mail piece that promised to lower his mortgage payments by a considerable amount. He calculated that he could go from paying $1,800 to approximately $585 a month.

Deschamps says that the piece looked very professional and honest so he took a leap of faith. “But of course as soon as the money was sent to them, the professionalism just went out the door." He ended up losing $3,485 when he paid an up-front fee.

He said that the company “disappeared” after he made the payment. “The money was gone. They all disappeared."

Kim said, "You shouldn't be paying anybody any money up front to get you out of a mortgage problem. That thing can be done for free through an approved housing counselor here in Hawaii."

How can the average consumer avoid becoming a victim of one of these ongoing, ever-changing scams? Experts say that the buyer should be aware and learn how to spot mortgage relief that isn’t on the up and up.

Foreclosure Scammers Are Looking for the Quick Payout

Similar to what happened to Isaac Deschamps, many predatory companies that promise to save the borrower’s home from foreclosure will typically ask for an “up- front” fee and then vanish into thin air.

Yolanda McGill, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers’ Committee for Civil Rights Under Law says that this type of scam is a crime of opportunity. “A lot of people who are participating in this are probably long-term schemers and this is the cash cow right now. They’re going to ride the train and milk it for all it’s worth. You have an enormous pool of distressed homeowners.”

Many of these con artists will try to entice the homeowner several ways such as saying they will prepare documentation while the borrower attempts loan modification or by posing as an attorney.

Once the scammer has the homeowner’s trust, McGill said that the company will offer their services, grab the homeowner’s money and then split.

However, McGill said that the Mortgage Assistance Relief Services Rule, which went into effect in January, strictly prohibits companies from demanding an up-front fee for mortgage modification or mortgage relief help.

She added that homeowners should be wary of the con artist who asks the homeowner to sign a quitclaim deed. Signing this paperwork transfers home ownership to the scam artist--who may originally promise to let the homeowner stay in his or her home. In fact some scammers have the gall to approach homeowners who have already lost their home, asking for money so that they can get their home back.

“The scams are going to morph, but the message really needs to be: Don’t give anyone money to help you with this,” McGill concluded.

Short Sale Scams Are Costly To Lenders and Borrowers

The short sale scam has brought more than annoyance and headaches to numerous homeowners looking for help. Lenders are getting hit and CoreLogic believes that fraudulent short sales may have cost lenders almost $375 million a year.

Although lenders may be getting taken to the cleaners, it’s ultimately the consumer who ends up paying. Lenders that lose money due to fraudulent activity have to make up for the deficiency some way--typically through increased borrowing costs and higher rates.

The scam starts when a predatory duo finds a homeowner who is interested in a short sale. A short sale is when a homeowner, on the verge of foreclosure makes a deal with the lender to payoff the home for less than its worth.

One con artist poses as the seller (or someone who represents the seller) and makes a low-ball offer to the lender. The second con artist pretends to be an interested buyer and purchases the property at the lower price, but then turns around and immediately sells it to an actual buyer--for a higher price.

The second con artist takes the difference for himself and may share it with the first con artist.

In addition to door-to-door scams, consumers should be wary of the myriad of online mortgage scams running at any given time. Last week the federal government shut down a gaggle of online mortgage scam artists who were advertising on Google. The ads made unfounded promises that the company would help the homeowner avoid foreclosure.

John M. Simpson from Consumer Watchdog said, "Google should never have published these ads, but its executives turned a blind eye to these fraudsters for far too long because of the substantial revenue such advertising generates.”

Consumer Watchdog’s suspicion goes back to February when it found that Google processed more than 74,000 searches from desperate homeowners looking to “stop foreclosure.”

Christy Romero, deputy special Inspector General for the Troubled Asset Relief Program said that the Internet provides ripe opportunities for scam artists. "The first place many homeowners turn for help in lowering their mortgage is the Internet through online search engines, and that's precisely where they are being taken advantage of and targeted."

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