In June, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury released its first analysis of suspicious activity reports (SARs) containing information about potential foreclosure rescue scams. In addition to the increase in reported activity, the analysis showed the nature of foreclosure rescue scams shifted during the period examined and alerts financially troubled homeowners to new scams.
The FinCEN report, Loan Modification and Foreclosure Rescue Scams – Evolving Trends and Patterns in Bank Secrecy Act Reporting, involvedan analysis of more than 3,500 SARs filed from 2004 through 2009, of which 3,000 were filed last year. Early SARs containing information about loan modification/foreclosure rescue scams identified subjects purporting to be loan modification or foreclosure rescue specialists. These individuals and groups targeted financially troubled homeowners with promises of assistance. The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. According to the report, the scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.
The scams described in later SARs reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner's mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.
"If you are at risk of foreclosure or have already received a foreclosure notice, you should contact your lender immediately," said Jeff Bell, president of the Silicon Valley Association of REALTORS®. "Homeowners should also seek the advice of a reputable housing, financial or credit counselor, attorney, or other qualified professional."
The local trade association shares the following information from the California Association of Realtors on some of the red flags for foreclosure scams you should watch out for.
If the individual or company:
• Asks for money upfront before providing any service.
• Instructs you not to contact your lender, lawyer, housing counselor, family, friends, or others.
• Asks for mortgage payments to be made directly to his or her company or a bank account set up by that person, rather than your lender.
• Requires payment only in the form of cash, cashier's check, or wire transfer.
• Promises to stop the foreclosure process, no matter the circumstances.
• Advises you to transfer your property deed or title to his or her company.
• Offers to fill out paperwork for you.
• Asks for something to be done immediately and without delay, including pressuring you into signing paperwork that you have not had the chance to read thoroughly or do not fully understand.
• Encourages you to lease your house and buy it back over time.
• Offers to buy your house for a fixed price that is not set by the housing market at the time of sale.
• Asks for you to give a power of attorney.
• Asks for signatures on a grant deed or deed of trust, or on a document that has lines left blank.
• Fails to provide copies of signed documents.
• Refuses or fails to put an oral promise in writing.
Homeowners may visit the U.S. Department of Housing and Urban Development website at http://www.hud.gov/ to view its "Guide to Avoiding Foreclosure" and list of California HUD-approved housing counseling agencies. In addition, homeowners may call the nonprofit Homeownership Preservation Foundation 24/7 toll free Homeowner's HOPE Hotline at (888) 995-HOPE.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.