The Federal Bureau of Investigation is cautioning against a growing number of cases of mortgage fraud, mostly from fraudulent loan applications. The FBI is especially cautioning troubled homeowners, who are the most vulnerable to investment, modification and foreclosure prevention schemes.
Troubled homeowners at highest risk
The Federal Bureau of Investigation has released its latest figures for mortgage-related crime in 2010, according to Reuters, and the agency is warning of an increase in mortgage-related crime. There were 3,129 pending investigations of mortgage-related fraud as of the fiscal year that ended in September of 2010, a 12 percent increase from the same date in 2009. The number of cases in 2009 was a 90 percent increase from 2008. Troubled homeowners, according to the Christian Science Monitor, are at the greatest risk as fraud involving “foreclosure rescue” and similar schemes were becoming more prevalent than fraudulent loan origination schemes. People will often be promised foreclosure rescue or foreclosure prevention if they will sign over the deed to their home, or pay a hefty upfront fee only to be left in the lurch and be foreclosed on anyway. Just like debt relief scams, an upfront fee for services is a red flag consumers should be aware of.
Wolves in sheep clothing
According to the FBI, the Department of Housing and Urban Development reported scams that involved principal reductions, rent-to-own leasebacks and false re-conveyance. These schemes involve a predatory “rescue” firm taking ownership of the home from a troubled homeowner, and then “leasing” the property back to them at an inflated rate that the tenant can’t keep up with. In a false re-conveyance, the victim still retains a miniscule amount of equity when finally evicted from the home. Areas with higher-than-average home values, such as New York, New Jersey and California, were the “hot-spots” for mortgage related fraud. According to the FBI, Las Vegas was the city with the highest number of mortgage fraud investigations pending, but Florida accounted for 27 percent of all mortgage fraud related cases. Troubled homeowners in those areas should be especially cautious.
Enormous industry of predation
Mortgage scams are a huge business. According to the Christian Science Monitor, among the large instances was a $3 billion fraud case against Taylor, Bean and Whitaker Mortgage Corp., and Chairman Lee Farkas was given 30 years in prison. According to the New Jersey Star-Ledger, the state of New Jersey recovered $2.2 million in restitution last year for fraud-stricken homeowners. According to Reuters, a judge in New York froze the assets of United Legal Solutions, formerly Homesafe America Inc., for allegedly defrauding troubled homeowners. Homesafe, as of February, had “modified” the mortgages of more than 1,000 families and took in more than $2 million during 2010. The company would demand several thousand dollars upfront to save a troubled mortgage. Troubled homeowners should remember the old saying “if it seems too good to be true, it probably is.” Mortgage modifications are best done through the loan lender, not third parties.