Tag Archives: scams

Georgia: One of Top Five States Contributing to Increase in Mortgage Fraud

Throughout 2012, we have written articles related to various types of scams, primarily in the mortgage industry.   Unfortunately, according to Interthinx, in the fourth quarter of 2012, the risk of mortgage fraud elevated to its highest level since 2009.

Key to this increase is property valuation fraud. Property valuation fraud occurs when property values are manipulated to create equity.  Presently, investor activity in recovering metropolitan areas (metros) creates rapid price changes and opportunities for value manipulation.  It rose 25 percent in the third quarter.   

Other types of fraud Interthinx tracks are identity, occupancy, and employment/income.

Reflecting the national trend, the number of “very high risk” metros spiked from 70 in the third quarter to an unprecedented 125 this quarter, as reported by Interthinx.

Georgia is in one of the top five states that has contributed to the increase by adding 6 more high risk metros.

 “Clearly, this report illustrates the reality that the mortgage industry is driven by trends at the state and metropolitan levels and that the will to commit mortgage fraud is not abating – it is simply shifting strategy to meet opportunity,” said Jeff Moyer, president of Interthinx.


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Filed under Consider the Law

Renter Title Fraud, as Reported by Stewart Title

A sophisticated title fraud scheme involving residential rental properties reportedly in the Los Angeles area occur anywhere and thus it is important to be aware of the scheme.

The typical fact pattern:

The perpetrators initially obtain title searches to identify rental homes that have no mortgages or small mortgages on them. Using fake identification and documentation, the perpetrators initially pose as renters for these properties. They enter into a lease with the real owners of the properties, and pay a security deposit and the first month’s rent.

The perpetrators then steal the identity of the real owner. The perpetrators use a different set of high quality fake identification, which may include counterfeit passports and drivers licenses, to impersonate the owner and apply for a home equity loan. The perpetrators may also order appraisals of the property.

The perpetrators usually seek a loan from a “hard money” lender.  Hard money lenders provide short term (bridge) loans based upon the value of the real estate, the amount of equity, and the potential salability of the property, rather than the creditworthiness and income of the borrower. Since the loan underwriting is based primarily on the value of the real estate, the loan-to-value ratio is usually lower than a typical loan (e.g., not more than 65%).  Hard money loans are often for shorter periods and higher interest rates than traditional loans.  A hard money lender may not perform a standard credit evaluation or require the customary income and asset verification ordinarily required by a traditional lender.

Prior to the closing, the perpetrators also set up new bank accounts in the names of the real owners. The perpetrators appear at the loan closing, posing as the true owners.  When the loans are funded, the settlement providers are instructed to transfer the proceeds to these bogus accounts. Thereafter, the money is withdrawn in small amounts by check or in cash.

The real owners may remain unaware of the scheme until they receive a notice of default or foreclosure from the lender.

This scheme is sophisticated.  A raid on one group of people suspected of perpetuating this fraud found several pre-paid cell phones lined up, each labeled with the name and home address of different homeowners.  Fake email addresses were also reported to be involved.

The following are some common factors that may assist in identifying this type of fraud:

  • Residential rental property;
  • No existing mortgage or small mortgage;
  • Loan transaction only, without a simultaneous purchase or payoff of a large existing loan;
  • Hard money or other non-traditional financing (e.g., no income verification).

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Filed under A Need to Know Basis

Scam Artists & Homeowners: What They’re Doing and How to Protect Yourself, Part I

As part of National Fraud Prevention month, I’d like to take this opportunity to speak with you about an unfortunate type of fraud that is challenging desperate homeowners.

Anyone facing the possibility of losing his or her home to foreclosure is distressed and worried. Unfortunately, scam artists look for these opportunities to prey on the fears of desperate homeowners.  This series of posts should help you know what to look for and how to avoid being their next victims.

Tactics of Scam Artists

The companies or individuals involved in an enterprise designed to scam homeowners may use a variety of tactics to find homeowners in distress. One avenue is through public foreclosure notices in newspapers and on the internet or through public files at local government offices. Once the names are located, some scam artists will send personalized letters to homeowners. Others will try to reach homeowners through ads on the internet, radio or television or radio, in newspapers, posters and at bus stops. They may send out flyers and business cards or even arrive at the homeowner’s front door.

In one type of scam companies or individuals make promises to the homeowner stating that they can change the terms of the loan, reduce the monthly mortgage and save the home from foreclosure.  Such companies actually tell homeowners that they are able to save their homes and even may offer a money-back guarantee. Some companies have their employees call and tell the homeowner that they are affiliated with the lender or the government and offer the help of attorneys or real estate agents. This is just another way these con artists promise relief and fail to deliver, leaving the homeowner in a worse financial state.

Some scam artists tell the homeowner to pay them a fee for negotiating  a deal with the lender to reduce mortgage payments and prevent foreclosure. Some may claim to be attorneys or representatives of a law firm. They may tell the homeowner not to contact their lender, lawyer, or credit counselor based on a promise that they will handle all the details once they receive the fee. Once the homeowner pays the fee, the scam artist stops returning the homeowner’s calls and disappears with the money.

Another tactic is the use of telephone calls initiated by people pretending to be credit counselors.  These people often insist that mortgage payments be made directly to them while they negotiate with the lender. They may collect a few months of payments and then disappear.

Pretending to Be an Auditor

Some scams involve people posing as loan auditors or foreclosure prevention auditors (for example), and requiring an upfront fee for an attorney or other expert to review mortgage documents to determine if the lender complied with the law. These so called auditors may tell the homeowner that they can use the attorney’s report to avoid foreclosure, facilitate a loan modification or reduce the amount of the loan.  Inevitably, the scammer’s promises do not materialize, and the fraudster disappears with the money.

Other Schemes

Scam artists may use a rent-to-buy scheme and tell the homeowner to give up the title to his house as part of a deal that allows the homeowner to stay in the home as a renter and buy it back later. The con artist will say that surrendering the title will actually benefit the borrower with a better credit rating, qualify the homeowner for new financing and save the home.   Ultimately, the homeowner loses the house, and the scam artist disappears with the money the homeowner paid.  This scheme leaves the homeowner without a title to his home and more likely than not, facing eviction. In a similar hustle, the scam artist raises the rent over time so the homeowner cannot afford it. The homeowner starts missing payments, is evicted and the scam artist sells the house.

Some schemes involve an offer to find a buyer for the homeowner, but only if the homeowner signs over the deed and moves out. The con artist promises to pay the homeowner a portion of the profit when the home sells. After the homeowner transfers the deed, the fraudster rents the home and pockets the proceeds and the homeowner’s lender proceeds with foreclosing on the home. The homeowner loses the home and is responsible for the unpaid mortgage because the homeowner transferred only the title but not the debt.

Bait and Switch

In a bait-and-switch scam, con artists give you papers they claim you need to sign to get another loan to make your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a “rescue” loan.

In Part II of this series, I’ll share a variety of FTC recommendations, what you should watch out for and how to make sure that you’re getting what you bargained for.

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Filed under A Need to Know Basis