The Federal Bureau of Investigation recently outlined several tactics con artists and defrauders are using to exploit the financial crisis.

Owners, speculators, or investors are committing arson on a property when faced with foreclosure.  During this scheme the owner files a fraudulent claim, citing a fire-related cause covered by his insurance in order to pay off the lender.

An individual acting as a paralegal will manipulate the bankruptcy system claiming to be in negotiations with an owner’s mortgage lender.  He locates a property owner facing foreclosure and promises foreclosure assistance requiring an up-front fee.  He will advise the homeowner to cut all contact with the lender, and many times will require the homeowner to redirect mortgage payments to himself.  He will dupe the homeowner into signing bankruptcy paperwork, temporarily stopping the harassment from collection agencies.  But when the homeowner fails to appear at the bankruptcy hearing, the harassment begins again.

Property Transfer
An individual claiming to be a foreclosure avoidance expert will manipulate a home owner into transferring his property to the perpetrator.  He will then require the homeowner to sign a lease and pay rent.  The perpetrator eventually will either sell the property back to the homeowner, or sell the property to a third party.

In a slight variation, the accommodator acquiring title to the property will then transfer his interest multiple times, delaying the foreclosure process for months, while collecting money for himself.

Loan Modification Program Schemes
Loan modification programs sponsored by the government have generated scam artists who are promising the homeowner loan modification assistance for a high up-front fee.  The homeowner is told to stop communication with his lender, and when notices of default and foreclosure arrive, the homeowner is advised that the lender requires a “good faith” payment for the loan modification to become finalized.  The funds are received by the scam artist and are not delivered to the lender.

first tuesday take: There is nothing new here for real estate brokers and agents to learn, as they have long since seen this one developing.  Fast money is directly responsible for the entry of fast people, and lenders with the backing of Wall Street bankers did their best to deliver both.  Hopefully, not too many real estate licensees got in on the wrongful participation.

Re: “Mortgage fraud is ‘rampant’” from The Orange County Register