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Mortgage Fraud During & After COVID-19

Mortgage Fraud During & After COVID-19

One of the biggest concerns facing our economy during the pandemic is homeowners’ ability to manage their mortgage payments with reduced, or no income. In the previous recession over a decade ago, many American consumers struggled with the same problem. At that time, the federal government, as well as private lenders, instituted multiple programs which gave delinquent homeowners the opportunity to modify or refinance their loan terms in order cure delinquencies/defaults.  This also helped make the payments more affordable. Unfortunately, that crisis and the subsequent reactions by the government and lenders afforded many criminals the opportunity to fill their pockets at the expense of desperate, struggling homeowners.  Here’s what you need to know to avoid becoming a victim of mortgage fraud.

The Loan Modification Scam

Multiple variations of the “home retention” or “foreclosure rescue” scams were perpetrated, all with the alleged purpose of allowing the homeowner to keep their home. In one variation, the con artist would claim the ability to negotiation loan modifications with the lenders for a fee and urge the homeowners to make payments to them while the supposed loan modification process moved forward. Unfortunately, these criminals would retain the money paid to them by the homeowners and make little or no attempt to actually obtain an affordable loan modification for the homeowners. It was not until the properties were in foreclosure that the homeowners became aware that they had been scammed.

The Foreclosure Rescue Scam

Other criminals would negotiate a transfer of the home, where the homeowners would sign the property over to the criminal enterprise, and then pay “rent” on their former residence. This was done in the belief that the transfer the property could prevent a foreclosure, and then when the homeowners were back on their feet, the property would be transferred back to them. However, as in other variations of the scam, the con artist would retain the rent money, without making any payments towards the mortgage. Foreclosure and eviction would ensue. In addition to losing their homes, many unsuspecting homeowners would provide financial documents to be used in applying for the fake loan modification, such as income tax returns and bank statements, which would lead to the loss of other assets, as well as identity theft.

Protect your Personal Information

There are many ways available for criminals to access information that would make a homeowner believe that they were somehow affiliated with the government or the home lender. Obtaining a free copy of your credit report gives multiple parties access to your credit report information, which they can use to verify if someone is a homeowner with a delinquent or distressed mortgage. The information obtained from the credit report will then be used to contact the homeowner and establish some legitimacy as to the proposal of the con artist. Additionally, states like Georgia require mortgage lenders to advertise foreclosure notices in the newspaper for a period of four consecutive weeks, prior to the eventual foreclosure sale. By accumulating information from all of these sources and emphasizing the urgency of the potential home loss, the con artist can make a compelling presentation that may persuade a desperate homeowner to make poorly-researched decisions and become a victim of mortgage fraud.

If you are a homeowner with a distressed home loan, keep in mind that under most loan modification and moratorium programs, the burden is on the homeowner to contact their lender to apply for relief on a distressed mortgage.  If you have a federally guaranteed loan, you will need to contact Fannie Mae, Freddie Mac, the VA, or USDA to find out what home retention options are available to you. This contact information should appear somewhere on your monthly statement. Likewise, a private lender will also provide similar contact information on your mortgage statement, or a non-payment communication which comes directly from the lender. In our experience, neither the federal government nor a private mortgage lender is going to engage a third-party on their behalf to negotiate with the homeowner. Because the individuals and companies perpetuating these scams are constantly changing name and location, it is very difficult to perform an Internet search which would verify or dispute the legitimacy of the alleged “home retention” business.

Warning Signs

How do you know if you are being contacted by a potential scam artist? These are clues indicative of mortgage fraud:

  1. the first contact the potential scam artist comes via unsolicited telephone call, email or text message;
  2. the scam artist promises results which are too good to be true, such as a reduction in your house payment of almost 50%, and/or even a reduction in the balance owing on the mortgage;
  3. the scam artist claims to have a special relationship or long history with your mortgage company, which will yield a successful loan modification;the scam artist emphasizes the urgency of the matter, and pushes you for an immediate decision;
  4. the scam artist emphasizes the urgency of the matter, and pushes you for an immediate decision;
  5. you are advised to no longer have direct contact with your mortgage company, or its representatives;
  6. you are directed to stop making your mortgage payments, and to instead route them to the third party “home retention specialist”;
  7. you are directed to transfer your interest in your home to the “home retention specialist”, or a company or individual affiliated with the scam artists.

What Can You Do if You’re Behind on Your Mortgage Payments?

If you are a homeowner with a distressed home loan, keep in mind that under most loan modification and moratorium programs, the burden is on the homeowner to contact their lender to apply for relief on a distressed mortgage.   If you have a federally guaranteed loan, you will need to contact Fannie Mae, Freddie Mac, the VA, or USDA to find out what home retention options are available to you. This contact information will usually appear somewhere on your monthly statement. Likewise, a private lender will also provide similar contact information on your mortgage statement, or a non-payment communication which comes directly from the lender. In our experience, neither the federal government nor a private mortgage lender is going to engage a third-party to negotiate with the homeowner. Because the individuals and companies perpetuating these mortgage fraud scams are constantly changing name and location, it is very difficult to perform an Internet search which would verify or dispute the legitimacy of the alleged “home retention” business.

In Conclusion

Finally, it is important to be realistic, both for yourself and your family. A permanent reduction in income may make your loan payment unaffordable, and you may not have sufficient income to qualify for a loan modification. Trying to save a home that has no equity by depleting other assets, such as your savings or 401(k), can result in you losing assets besides your home.

If you are denied for a loan modification, and wish to avoid a foreclosure, you may wish to consult with a bankruptcy attorney to discuss saving your home through a bankruptcy court supervised repayment plan.