Fraud in the Foreclosure Process
Scam artist makes good use of the foreclosure system and process. Foreclosure actions can be listed several times in newspapers, on county bulletin boards, and recently on countless foreclosure websites. By gathering as much information as they can from these sources, swindlers have enough information to deceive desperate homeowners. Let’s review the public notification processes and illustrate how scammers pick their targets. You may have learned about the steps in the foreclosure process, as shown in the illustration below:
When a borrower homeowner misses payments, usually by the second month, the lender will contact the person. If nothing is done to resolve the issue, after a certain length of time depending on the state – for example, 45 days – the lender will send a notice of default. This action marks the start of a remedial period where the borrower may make payments and settle all accrued late fees. Failing a resolution, at about 90 days, the lender will send the mortgage to its legal department or contact an attorney who will begin the formal foreclosure process. The lender’s attorney will send a certified letter to the borrower and file a notice of default at the local courthouse. This notice of default will also be published in the newspaper for public notification. The newspaper notice may be published several times up to the time of the public auction. From this point, anyone may potentially enter the picture with “workout” plans or may be able to simply buy the property. Whether these actions can be taken, of course, depends on the terms of the mortgage. In addition, foreclosures are often placed on county websites and some real estate websites that specialize in foreclosure properties. Most of these sites are legitimate and helpful for agents and buyers alike. Unfortunately, people who are attempting to abuse the system\ may find all relevant data regarding the property: address, a name of the owner, the trustee or lender that is foreclosing, the property’s status, unpaid balances, and, perhaps even the opening or first bid or first loan amount.
Scammers Find New Ways to Defraud
Foreclosure scammers often advertise on radio, television, or in newspapers with ads that say “Save Your Home,” Foreclosure Rescue,” “Don’t let the Bank Get your House,” “We Buy Homes,” “Refinance: Bad or Good Credit.” Lately, scammers have used a relatively new tactic where they appeal to a person’s ethnic, religious, or cultural heritage. “Christian” foreclosure services designed to help fellow Christians, or Hispanic refinancing by Hispanics, or blacks rescuers for black homeowners. For example, in 2006, in Post Falls, Idaho, Amy Birge, a single, disabled mother of three, fell behind on her mortgage payments and was facing the prospect of foreclosure. Her son’s former preschool teacher told Birge about a “church friend” who worked at Highland Financial LLC that could help save her Post Falls home. Believing that she was out of options, she accepted an offer from Highland Financial, believing that, with the company’s help, she could keep her house. Birge and her former husband had originally paid $111,000 in 2002 for the house. Birge claims that in October 2006, two months into her agreement with Highland, without her knowing, the company took an additional $30,000 loan on her property and “skimmed” half of the equity from her home.
To get her house back, Birge found that she owed Highland $155,000. The amount due was about $48,000 more than what she had owed on the original mortgage – the equivalent of a 400 percent interest rate. Birge and her children were eventually evicted from the house. In December 2007, Highland Financial LLC and the Office of the State Attorney General of Idaho reached a legal settlement under which Highland Financial agreed to comply with the Idaho Consumer Protection Act in its future advertising and promotions. As announced by Idaho Attorney General, Lawrence Wasden, under the terms of the settlement, Highland Financial agreed to pay $1,000 in civil penalties and reimburse the Attorney General’s Office $2,000 in attorney fees and costs. Highland Financial did not admit any liability or wrongdoing. Birge did not recover her house.