Government indicts more than 500 on mortgage fraudby Peter Miller
Con artists know how to spot an opportunity. As soon as the housing crisis began to take shape, con artists were ready and waiting with scams and false promises designed to take advantage of struggling homeowners. With untold numbers of homeowners, or former homeowners, counted among the many victims, the U.S. government has launched its own campaigns and investigations to root out this increasingly popular form of fraud.
Just this week, the Justice Department announced charges against 530 “criminal defendants” who allegedly engaged in some form of mortgage fraud. The Justice Department said the cases involved more than 73,000 victims and damages in excess of $1 billion.
There are several schemes con artists employ to dupe homeowners. The most common scam involves the false promise that if a homeowner pays a substantial upfront fee, “investors” are waiting to purchase the property. They convince the struggling homeowner to turn over the deed to the property with the notion that they can rebuild their credit standing by renting back their own property for some time. Homeowners are convinced that once they get the property back they can refinance at today’s low mortgage rates and resume living in their home with a mortgage that is much more affordable.
But it never seems to work out that way.
Following Maryland’s lead
If we really want to resolve the problem of foreclosure rescue then we ought to follow the example set by Maryland and a few other states. Under Maryland law, anyone can engage in foreclosure rescue as long as they give the seller a one-page form which the state has provided. The form include such things as the amount of cash advanced, the purchase price of the property, the buyback price of the property and the amount of rent.
An additional state requirement says that in transactions which are defined as a foreclosure rescue, the original owner is to receive 82 percent of any profit if the property is sold within 18 months by the new owner. Failure to give the owner the one-page anti-flipping form or failure to pay the money due can result in a jail sentence.
The indictments announced by the Justice Department are the byproduct of foreclosure-rescue schemes, situations where con artists take advantage of gullible and vulnerable homeowners who are rightly terrified by the thought of foreclosure.
Despite the negative press, there are private investors out there that are interested in legitimately buying distressed properties from homeowners destined for foreclosure. StopFraud.gov is a government website designed to educate consumers on how to spot and prevent fraud.
While individuals can certainly educate themselves on the latest schemes and tricks, perhaps more states should follow Maryland’s lead and get fraud protection in writing.