Scam artists follow the headlines, and know there are homeowners falling behind in their mortgage payments or at risk for foreclosure. Their pitches may sound like a way for you to get out from under your situation, but their intentions are as far away from honorable as they can be. They mean to take your money. The Foreclosure Crisis is not immune to this type of behavior.  As LFI hears of these scams, we will post regarding them.

Sep 24, 2009

September has seen two different types of scams reported to LFI.   One is an attempt to circumvent Department of Real Estate and California Foreclosure Law, and the other is simply a scam, pure and simple.  They are:

Purge the Loan

LFI first heard about this three months ago, when a person had requested an audit.  He claimed that he had been contacted by a party and was invited to a seminar whereby the speaker proclaimed that through TILA/RESPA and "unknown laws", loans could be "purged".  LFI advised him that this was not a likely event.

The beginning of Sep, LFI received a phone call from a party in Arizona. He was inquiring about this same scam, and a CPA friend of his was thinking of using it so save his home in Nevada.  LFI advised that he speak with a competent attorney about this program.

Monday, Sep 21, I received a phone call from a party who worked for this firm.  He discussed the program with me, making various claims.  Essentially, this program included the following.

• Homeowner signs up for the service, which costs $4000
• The firm send an "enhanced" QWR which asks for documents and details for over 150 different questions and items. 
• Failure to provide even one document results in the firm taking the lender to court for various TILA/RESPA/FDCPA and other Federal Violations
• The Federal Court will conduct an "Administration Action" and send a letter to the lender requesting information.
• Failure of the lender to provide the requested information results in the loan being "purged".
• Once the loan was purged, a new Deed of Trust and Note would be issued for 50% of the current value of the home with payments over 40 years at a 2% interest rate.  (Why would a new Deed of Trust be issued for a purged loan?) 
• The Deed of Trust and Note are made out to the firm, who then sells it to an investor at a discounted rate.  10% of the Note value is paid to the referring party as a referral fee.

Here are the issues with this "program". 

• There is no evidence of this program actually working.  The caller claimed 8000 successful cases of loan purging, with a 95% success rate.  When pressed for evidence of such, court cases, rulings, etc., he replied that it would be 2-3 months before I could get the rulings, and that was when a new batch of court cases were submitted and resolved.
• The Deed of Trust is made out to the firm, which means that this company is charging $4,000 upfront, and then, 50% of the value of the home for this "service", if it is successful.
• If this company is a law firm, and I could find no evidence of it being a law firm, then the payment of a referral fee is unlawful.  The excessive fees would also likely be unlawful.
• If this company is a law firm, then holding seminars in CA for business generation may pose legal issues.
• If this company is not a law firm, a check of the CA DRE website did not reveal that it had an Advance Fee Agreement with the DRE on file, which means that if it worked with people in foreclosure in CA, then it was operating unlawfully.

It should be noted that LFI contacted numerous attorneys that it deals with, including ones who work exclusively in Federal Court.  All replied as I had thought, that this was a complete scam.  The information about this company has been forwarded to the California and Nevada Attorney General's Office, the CA DRE, and the FBI.

LFI does not take this lightly.

It should be noted that this same company had another branch that offered Mortgage Acceleration Programs.  LFI has reviewed these programs and found that they do not work in most cases.  The programs are simply a Computer Software Program that they sell for $3500 and that tells you the best day of the month to make any payments due on a loan.  It is tied to a Line of Equity that you have your monthly paychecks deposited in. 

The numbers for payoff of your mortgage in the amount of years that it takes is usually represented as 8-12 years.  This is not true, except in a very rare case.  

Do not fall for this ruse either.

Loan Audit Firms

This is a scam that really upsets me.  Seen in the Sacramento area and also the Southern California area, there are loan auditing firms that charge from $3500 up to $8000 for an audit.  Then, they offer a loan modification for $100 additional.

This is a complete fraud.  They are a loan modification company that is trying to pretend that they do audits.  Such companies are violating Department of Real Estate regulations.

As well, be cautious of most companies who claim to do audits.  Large numbers of these companies are actually former loan officers who decided that this was an easy way to make money.  They go out and buy software for $79 that purports to do audits, but the software only covers a tiny portion of what LFI does, and then there is the problem that these people who "plug in the numbers" don't have a clue as to what constitutes the numbers that need to be inputted.

As well, there are many different ways to challenge the numbers.

The foreclosure prevention specialist

The "specialist" really is a phony counselor who is typically unlicensed in your state and charges outrageous fees in exchange for making a few phone calls or completing some paperwork that a homeowner could do for himself. These actions rarely results in saving the home because the lending industry knows who these scammers are and seldom agrees to work with them. This scam gives homeowners a false sense of hope, delays them from seeking qualified help, and exposes their personal financial information to a fraudster.

The lease/buy back:

Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back. Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the "rescuer" walks off with all the rent money and never paid a cent towards the mortgage.

The bait-and-switch:

Homeowners think they are signing documents to bring the mortgage current. Instead, they are signing over the deed to their home. Homeowners usually don't know they've been scammed until they get an eviction notice.

The Internet Foreclosure Specialists:

These fraudsters claim to have a "Nationwide Foreclosure Assistance Program." They have elaborate websites with false testimonials and an 800 number to call for immediate assistance. When you call, they will collect all your personal information first then tell you that "someone will get back with you shortly." They then sell your information to any fraudster that wants to buy it. That's who gets back with you shortly.

The Short Sale Flipping:

These con artists will send you a letter, or might even knock on your door to tell you that they want to "buy your house and that they have worked with your lender in the past." They will make a valid offer on your property well below the market value and tell you that "they know your lender, and that they will accept the short payoff." They then open escrow and proceed to purchase your home. They notify you that "your lender has accepted the short sale." All the while, they have never talked with your lender. The scam here is this. They have an accepted offer from you to buy the property at a price well below the market value. When they opened escrow, they instructed the escrow company to show their vesting as "Their Name and or Assigns." They then find a buyer to take the assignment of the purchase and who will agree to pay the difference up front between the agreed sales price and the market value. Both you and the new buyer have been duped. The new buyer has been robbed of his upfront cash while you are still in foreclosure with no short sale agreement from your lender. The con artist walks away with cash equity because he sold his rights to a bogus purchase.

What You Should Know:

Before doing business with anyone, you should know where their place of business is. You should know how long they have been at that location. You should know how long they have been in business. You should know all costs involved with their service. You should know whether or not they are properly licensed to conduct business. You should go so far as to meeting the individual you'll be doing business with

What to avoid:

• Anyone who makes promises when logic tells you that those promises may or may not be keep-able.
• Anyone who offers a service for free. They typically just collect all your documents then sell your personal information.
• Anyone who comes to your door and wants to buy your house.
• Anyone on the internet who claims they can modify your home loan but doesn't give pricing disclosure or does not have an address, or phone contact number.
• Anyone who offers a money back guarantee. Remember, they still have your personal information.
• Anyone who comes to your door offering you a bail out loan.