HOME Investigates Loan Scams

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Have we got a deal for you! “We can stop your foreclosure.” “We can guarantee you will qualify for a loan modification.” “We have a 98 percent success rate.”Any of these claims should be a red-flag alert, according to a report on mortgage loan scams released Wednesday by Housing Opportunities Made Equal of Virginia Inc., a housing advocacy group in Richmond.

The report, “Have I Got a Deal for You, An Undercover Investigation of Mortgage Loan Modification Scams,” was the result of a yearlong investigation by HOME and three other fair-housing organizations identifying tactics used by scammers to target homeowners in danger of losing their houses.

The National Fair Housing Alliance, the Connecticut Fair Housing Center and the Miami Valley Fair Housing Center in Dayton, Ohio, also participated.

For instance, a Richmond resident spent $1,875 for a loan modification that never materialized.She is one of 292 people in Virginia, including 23 in the Richmond area, who reported on a HOME-partnered website in the past year that they had been scammed.

The reports were made with the Loan Scam Alert System, a campaign of national, state and local partners to combat loan-modification scams.

The actual number is higher, because many victims may not have made reports with this multiagency organization or any other group, said Amy Nelson, investigations coordinator with HOME.

HOME analyzed Virginia data on the site through a collaborative agreement as part of its investigation to determine any possible victims in Virginia.

When HOME uncovered companies believed to be in violation, it shared the information with the Virginia attorney general’s office and other law-enforcement agencies. The investigations remain ongoing, she said.

HOME produced a list of 57 companies that could be scamming people in Virginia. The agency declined to identify the companies. Some are in Virginia, but most are based in California and Florida, Nelson said.

The majority of companies contacted by HOME told investigators posing as homeowners to stop making their mortgage payments and to stop contacting their lenders, Nelson said.

Even more troublesome was that about a quarter of them encouraged “homeowners” to submit fraudulent documents to improve their chances of getting modifications, she said.

For example, if income was too low to cover debt levels and thereby quality for modifications, agents with suspect companies would suggest creating fictional income or revising household expenses downward.

“These companies were either breaking the law outright or skirting the edge of the law in order to scam vulnerable homeowners out of their last dollars,” Nelson said.

“The companies made promises they couldn’t keep and insinuated that they were the only ones the homeowner could depend upon in an attempt to gain the trust of families facing foreclosure.”

Paula Sherman, education and training coordinator for HOME, said homeowners, including those current with their mortgage and others facing foreclosures, are being bombarded with suspicious information.

HOME is working with state and federal agencies on possible legal actions against companies that may be violating the law.

  http://loanworkout.org/2011/04/home-investigates-loan-scams/