Scandalous instances of foreclosure fraud
Not too long ago, real estate investment seemed so much like the golden ticket to longtime success. Housing prices were over the roof as low-interest rates and generous financing requirements encouraged more people than ever to venture into owning homes.
But sadly, like many other cases where things seem too good to be true, the real estate boom revealed its dark side in no time. The housing market plummeted as a large number of homeowners started missing mortgage payments or walking away from homes they could no longer afford.
Sadly, the mortgage crisis forced many homeowners into foreclosure… after they failed to make home payments, their lenders exercised their legal rights to repossess the homes.
Some foreclosure scams target homeowners on the brink of losing their homes. Others take aim at lenders, and some may even be inadvertently caused by banks overwhelmed by the high number of bad loans in their portfolios.
Here’s a look at some of the most scandalous cases of foreclosure frauds in recent years.
Quite a large number of foreclosure frauds include some form of document forgery. But a widespread and more prominent problem didn’t come from outright fraud but from lenders trying to keep up with the boom in foreclosures that followed the bust.
In 2010, Bank of America, JPMorgan Chase, GMAC’s mortgage unit and PNC Financial temporarily halted the foreclosures they had underway after judges in several states ordered reviews of mortgage paperwork… (source: International Business Times).
The claims of improper processing generally followed similar lines from state to state: Investigators alleged that banks, in order to process thousands of pieces of paperwork a month on the growing wave of mortgages, directed their staff to “rubber stamp” signatures on paperwork. In some cases, investigators reported finding the same official’s name signed in several different hands-on different documents [source: International Business Times].
These timesaving moves by banks go against the letter of most states’ foreclosure laws, which have steps in place to ensure lenders fully review a mortgage before starting a foreclosure. The implications are hard to predict; although these processes are still under scrutiny, as of early 2011, the banks have been allowed to resume some foreclosures.
This problem has to be a homeowner’s worst nightmare: After dutifully making payments on a home that he or she can afford, the homeowner discovers that some odd twist of the lending process has gone awry and the bank can now repossess the hard-earned home. In the confusing world of the post-crash housing and lending market, it’s become a frightening reality for some unlucky homeowners.
These aren’t cases of intentional fraud. In some, such as a case where Lender A sold a loan to Lender B, but the homeowner sent payments to the wrong lender, they could be cases of failure to provide proper notice, or failure of the homeowner to keep track of who owns the mortgage.
A survey of articles on this topic revealed that there might be widespread problems with sloppy, incomplete or confusing paperwork leading to inappropriate foreclosures. The moral is clear: Homeowners should keep comprehensive records of their mortgages, and they would be smart to develop good relationships with their lenders in order to catch the small errors that could turn into major problems if left unchecked.
FRACTIONAL INTEREST TRANSFERS
One of the most insidious types of foreclosure fraud is the fractional interest transfer. According to the Department of Justice (DOJ), this fraudulent practice is slightly more common in West Coast states and can have far-reaching effects on both homeowners and lenders.
The details of fractional interest transfers may vary from scam to scam, but they all involve the homeowner signing over a portion of his or her ownership stake to a company that claims it can stop the foreclosure process. Through a series of moves, such as hiring “straw owners” to take part of the ownership and then file bankruptcy, the scammer is able to delay the foreclosure process. This service often comes at a price, as the homeowner not only gives up a portion of the ownership, but also may pay a monthly fee.
In the end, though, these companies rarely, if ever, stop the foreclosure process. Their bankruptcy filings simply stall the process and can sometimes send an unwary homeowner into bankruptcy. DOJ investigations have found that, in many cases, the companies perpetuating these schemes never intend to rescue their clients from foreclosure — they simply use a series of semi-legal maneuvers to milk as much money out of their victims as they can before the foreclosure is complete.
Now, obviously these frauds having been in the open are being avoided by scammers… it is still advised to be on the lookout because, there may be new development of ways to carry out these schemes and rid people of their homes.
So, when you receive offers that seem so good to be true, thread with caution and seek professional advice or help.