Friday, May 16, 2008

Mortgage scams target the "already unfortunate!"

I guess I'm one of the luckier people out there. When housing prices skyrocketed, I chose to remain happy with my humble digs and watch the frenzy. Now that the bottom has fallen out of the housing boom, at least I'm still semi-whole.

The reason I can only say that I'm semi-whole is that last month I mailed a check to the IRS. In reality, it's probably going to be "proceeds from tax coffers" paying for the mess that was created.

There was fraud in the housing boom. Exactly how much, nobody really knows or is saying. With a lot of desperate people out there -- one thing is for certain -- there are going to be dishonest people approaching them with fraud schemes promising to get them out of their current dilemma.

The FBI just released an interesting report showing fraud trends that contributed to the current financial crisis the housing boom has caused. It's key findings were that mortgage fraud is on the rise, subprime loans contributed to mortgage fraud, the downward trend in housing will continue and that the current financial crisis is creating a new wave of fraud targeting the people, who have already lost their shirts, as as result of this crisis.

From the press release on this subject:

The latest mortgage scams run the gamut: from “builder-bailout” schemes where developers unload excess inventory through financial trickery…to foreclosure rescue frauds that trick homeowners into signing over the deed to their house; from seller-assistance scams that use false appraisals to sell homes…to identity theft that leads to home equity credit lines being opened and drained. See the report for more details.

The report lists the two main categories of mortgage fraud:

Mortgage loan fraud is divided into two categories: fraud for property and fraud for profit.

Fraud for property/housing entails misrepresentations by the applicant for the purpose of purchasing a property for a primary residence. This scheme usually involves a single loan. Although applicants may embellish income and conceal debt, their intent is to repay the loan.

Fraud for profit, however, often involves multiple loans and elaborate schemes perpetrated to gain illicit proceeds from property sales. It is this second category that is of most concern to law enforcement and the mortgage industry. Gross misrepresentations concerning appraisals and loan documents are common in fraud for profit schemes and participants are frequently paid for their participation.
The full report, which goes into a lot of detail on current trends can be seen, here.

Besides the latest report, the FBI has a page on their website dedicated to educating the average person how they might be taken to the cleaners as a result of mortgage fraud.

The page has information on a lot of the recently discovered schemes. Included is a well-written story about a pretty scary phenomenon called, "house stealing."

House stealing is where mortgage fraud meets identity theft.

… The con artists start by picking out a house to steal—say, YOURS. … Next, they assume your identity—getting a hold of your name and personal information (easy enough to do off the Internet) and using that to create fake IDs, social security cards, etc. … Then, they go to an office supply store and purchase forms that transfer property. … After forging your signature and using the fake IDs, they file these deeds with the proper authorities, and lo and behold, your house is now THEIRS.*

Although not considered common, there was a recent case in Southern California involving a variation of this scheme and it involved over 100 homeowners. More recently, the Boston Globe reported that 11 individuals were indicted in a $10.6 million loan fraud scam. Straw buyers and identity theft are part of the formula in this case, also.

And it doesn't only happen in the United States, I've read of this occurring in Canada, also.

The FBI has allocated 200 agents and 33 task forces to investigate mortgage fraud, according to an article in Reuters that quoted FBI Director Robert Mueller. The article mentioned that 19 major corporations are under investigation and Mueller referred to the FBI's involvement in investigating the Saving and Loan crisis, Enron and World.com, while delivering his speech.

If you happen to get approached with an offer that seems a little too good to be true (or are suspicious of a past scheme) you can report the matter to the FBI. The people behind these schemes have caused a lot of pain and suffering for a lot of people and besides that, if you pay taxes, you are probably paying for this problem.


(Courtesy of the FBI site - click for larger image)

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