Latest Headlines on OCRegister.com
[x] Close
Mortgage Insider ~ Just another Freedomblogging.com weblog

Archive for the 'Fraud' Category

« Previous Entries

Calif. not in mortgage fraud task force

August 24th, 2009, 6:00 pm by Jon Lansner

Where’s California? Press release from Washington state …

Mortgage scammers and others seeking to prey on homeowners had better watch their backs. Attorney General Rob McKenna and Iowa Attorney General Tom Miller are co-chairing a new State-Federal Task Force on Mortgage Enforcement which is an unprecedented partnership to target fraudsters.

The Task Force is dedicated to enforcing both fair business practices and civil rights. Additional members include representatives of the U.S. Department of Justice, Department of Treasury, Department of Housing and Urban Development and the Federal Trade Commission and the attorneys general of Arizona, Colorado, Illinois, Nevada, North Carolina, Massachusetts, Missouri and Ohio.

“Scammers and opportunists need to know that they’re in the crosshairs of a tough, well-armed posse with a presence in every state,” McKenna said.

McKenna said that by combining their enforcement powers and expertise, state and federal authorities are in a stronger position than ever before to take on equity skimmers, foreclosure rescuer schemers, straw purchasers and unethical lenders who deceive or discriminate.

Hmmn!

Other dark side of lending news …

Posted in: Fraud • Regulation | 5 Comments »

Mortgage fraud is ‘rampant’

July 8th, 2009, 8:14 am by Mathew Padilla

The Federal Bureau of Investigation today said the housing downturn is creating a “rampant mortgage fraud climate” and that fraud is an “escalating problem in the United States and a contributing factor to the billions of dollars in losses in the mortgage industry.” Here are more highlights from the report on fraud in 2008:

  • Suspicious Activity Reports (SAR) on mortgage fraud from financial institutions increased 36 percent to 63,713 during fiscal year 2008 compared to 46,717 filings in 2007.
  • The total dollar loss attributed to mortgage fraud is unknown, but at least 63 percent (1,035) of all pending FBI mortgage fraud investigations during 2008 involved dollar losses totaling more than $1 million.
  • Top states for fraud are California, Florida, Georgia, Illinois, Michigan, Arizona, Texas, Maryland, Missouri, New Jersey, New York, Ohio, Colorado, Nevada, Minnesota, Rhode Island, Massachusetts, Pennsylvania, Virginia, and the District of Columbia. Rhode Island, Massachusetts, Pennsylvania, and the District of Columbia were new to the list in 2008, replacing Utah, Indiana, Tennessee and Connecticut from 2007.

The FBI also listed some popular schemes. One is a twist on equity stripping. It involves buying a property with a straw buyer and turning over ownership to a senior citizen. The senior is told to withdraw all the money with a second mortgage — this is made possible by an inflated appraisal — and then the fraudster makes off with all the cash.

Here are scams related to foreclosure:

Foreclosure Rescue - Arson

Homeowners, property flippers, and investors are committing arson to avoid real estate foreclosure. The insurance policy holder files a false insurance claim following the arson to extract illicit proceeds from the property to avoid foreclosure.

Foreclosure Rescue - Bankruptcy

Perpetrators are exploiting US Bankruptcy courts to defraud homeowners who are facing foreclosure. They are targeting distressed homeowners through Internet advertisements, newspapers, flyers, and through publicly available county foreclosure notices. They offer to provide the homeowner with assistance designed to prevent them from losing their home. They charge the homeowner an up-front fee, typically ranging from $200 to $1,000. In many instances, the perpetrators convince the homeowner to continue to make their monthly mortgage payment, but to direct the payment to the perpetrator. They also misguide the homeowner to cease any communication with the lender. The perpetrators direct the homeowner to complete the necessary paperwork which includes signing a bankruptcy petition. The perpetrator subsequently files the bankruptcy petition in the homeowner’s name with either the signed petition or a forged petition.

The bankruptcy petition invokes the automatic stay, resulting in the imminent foreclosure being postponed, and the homeowner stops receiving collection calls and letters. Frequently, homeowners are unaware of the bankruptcy petition and believe that the perpetrators have fulfilled their obligation to prevent them from losing their home. The perpetrators further misinform the homeowners to ignore any court notices to appear at the bankruptcy hearing. However, when no one appears at the bankruptcy hearing, the foreclosure process begins again.

In a variation of this scheme, the perpetrators convince the homeowner to “quit-claim” the property to the perpetrator or to sell the property for a nominal fee, usually $1. The perpetrators charge the homeowner rent until the mortgage problems are resolved. After which, the homeowner is able to repurchase the property or share the profits if the perpetrator sells the property. In some property transfers, the homeowner is instructed to transfer only a fractional interest in the property to the perpetrator who then transfers that interest to another individual or entity (often fictitious). Often, the fractional interest is transferred numerous times as the automatic stays are lifted, which delays foreclosure for months and generates additional proceeds for the perpetrators. According to the Executive Office of US Trustees, one residential property was linked to 24 different bankruptcy cases.

Foreclosure Rescue - Loan Modification Program Schemes

Loan modification schemes, typically in the form or an advance-fee/foreclosure rescue scheme, are emerging as recent vulnerabilities in HERA and EESA legislation (see second text box) becomes apparent. Lenders are mandated by recent legislation to work with homeowners to assist them in keeping their homes out of foreclosure; however, individuals are perpetrating advance-fee schemes to generate income from victim homeowners. Perpetrators solicit homeowners with mail flyers offering to help them stop the foreclosure process on their homes. Homeowners are falsely told that their mortgages would be renegotiated, their monthly payments would be reduced, and delinquent loan amounts would be renegotiated to the principle. Perpetrators require an up-front fee ranging from $1,500 to $5,000 from homeowners to participate in the loan-modification program. Perpetrators often request that the victim homeowners stop payments and communication with their lender. When victims receive delinquency and foreclosure notices, the perpetrators convince them that the loan was renegotiated, but that the lender needs a good faith payment to secure the new account.

The report on mortgage fraud is intriguing and disturbing to read.

By the way, my posts have been few over the past couple of days because I am finishing a story for Sunday on loan modification scams. But I plan to post more frequently soon.

More from this blog…

Posted in: Fraud | 8 Comments »

Do loan mod companies help or hurt?

March 24th, 2009, 5:00 pm by Mathew Padilla

I’d like to hear from anyone who has hired a private company for help getting a loan modification. Email me at mapadilla(at)ocregister.com with your name and phone number.

The California Reinvestment Coalition, a nonprofit consumer advocate, recently criticized the state Department of Real Estate for issuing approvals to private companies so they can collect advance fees from consumers seeking help getting a modification.

The coalition argues the state is endorsing companies that will take advantage of homeowners by taking their money and not getting them a modification. Here’s more from the coalition:

The surest way to protect the public would be to restrict the ability to negotiate loan modifications to only HUD-certified, nonprofit mortgage counseling agencies and legal services agencies, according to Kevin Stein, associate director of the California Reinvestment Coalition.

Currently, the Department of Real Estate (DRE), which licenses mortgage brokers and real estate agents, provides certification for some private loan modification companies. More than 200 such companies in California have been authorized to negotiate with loan servicers to modify mortgages, and there are about 500 more applications pending.

“We are concerned that in approving fee agreements, the DRE may be seen as endorsing companies that may wind up taking advantage of people,” Stein said. In fact, many are former mortgage brokers and realtors who are using foreclosure databases to market to at-risk homeowners.

Vulnerable homeowners are being sold services that are available for free from nonprofit mortgage counseling agencies who have the expertise and the mission to serve the interests of California homeowners. Many of those swindled by for-profit companies eventually find their way to nonprofit counselors, but at that point, the damage is done. Lenders and loan servicers have not been contacted, and the client is out thousands of dollars in fees while falling further behind on mortgage payments. The average fee for these companies is $3,000, though some have been as high as $9,500.

The Treasury Department has issued a warning about loan modification scams in announcement of the housing rescue plan, but there is no provision to crack down on these companies.

The latest banking/lending stories …

Posted in: Crime • Fraud • loan mods • | 13 Comments »

Mortgage bailout declared futile

February 21st, 2009, 3:00 am by John Gittelsohn

Bob Simpson, president of Imarc Investors Mortgage Asset Recovery Co., an Irvine firm that investigates why home loans go bad, says no federal mortgage rescue plan can save people from having gotten in too deep. Simpson says he’s seen thousands of people fail to pay mortgages for which they were not qualified. He anticipates seeing tens of thousands more this year, no matter what the government does. Excerpts of his conversation with the Register…

Q. What do you think of the President Barack Obama’s $75 billion plan to help troubled homeowners?
A. It’s not going to help us much in Orange County. First, people have to prove they qualify for loans. You can’t fake it anymore, which means a lot of people are out. This also applies only to Fannie and Freddie loans, which doesn’t include half of the people here with home loans.

Q. Who does it help?
A. It helps if you’re upside down on your home, but only up to 105 percent loan-to-value. The problem is, we peaked at about $635,000 average home and now we’re below $400,000. So we’ve got a ton of people who owe $500,000, $600,000, $700,000 and they can’t be helped. This plan won’t work in California, Florida, Arizona and Nevada — which account for more than 60 percent of foreclosures nationwide, because the values have fallen too far.

Q. Won’t that depend on the appraisal you get?
A. That’s the next wave of fraud: appraisals, because that’s what stands between you and refinancing. You might get an appraiser to say your house is worth that much for a refi. But I bet you can’t find anybody to buy it for that much.

Q. Doesn’t the Obama plan also offer people who are drowning in debt help to reduce their monthly payments to something like 38 percent of income?

Read the rest of this entry »

Posted in: Affordable Housing • Credit Crunch • Defaults & Foreclosures • Fraud • Meltdown • Q&A • loan mods • • • | 67 Comments »

O.C. foreclosure starts plummet amid new law

September 29th, 2008, 3:00 am by Mathew Padilla

A state law that took effect in early September has lead to a dramatic fall in foreclosure starts in Orange County and statewide, according to data compiled by ForeclosureRadar.com at Mortgage Insider’s request.

Before the bill became law on Sept. 8, banks typically filed 100 to 150 notices of default each day in the county, said Sean O’Toole, president. He said on the Friday before the law was enacted banks filed 162 NODs, and the following Monday, the first day of the new regulation, banks filed just 18 NODs.

NOD filings fell even further, languishing in the single digits in the days that followed. Lately they have increased slightly. For example there were 32 NODs filed on Sept. 17, O’Toole said.

Lenders usually file an NOD after a borrower has missed three or more monthly payments. NODs are the first stage of foreclosure.

Senate bill SB 1137, which Gov. Schwarzenegger signed on July 8 but the foreclosure provision was enacted 60 days later, states lenders and loan servicers must contact a homeowner at least 30 days before filing an NOD and explain their options to avoid foreclosure.

The bill only covers loans made during the final years of the housing boom.

O’Toole said the communication provision will slow NOD filings as banks adapt to the law. But he doesn’t expect a decrease in the total number of NODs or actual foreclosures over the long term.

“This is largely a paperwork issue,” O’Toole said.

He says if borrowers are upside down on their mortgages, they will still walk away. Nothing in the bill changes the fundamentals of the housing market, he said.

O’Toole said there could be a modest decline in actual foreclosures in coming months, but that would only delay the housing recovery, he said.

Whether he is right or not, the data suggests the same trend is occurring statewide.

California had been ranging 1,500 to 3,000 NODs daily, with 2,885 on Sept. 5. But three days later when the law went into effect banks filed just 164 NODs.

“It really fell of a cliff,” O’Toole said. “It’s a temporary impact.”

He said the statewide totals have climbed a bit up to a range of 400 to 500 daily.

And in related foreclosure topics…

Posted in: Defaults & Foreclosures • Fraud • Q&A • Uncategorized | 20 Comments »

O.C. 7th riskiest place to make home loan

September 4th, 2008, 3:00 am by Mathew Padilla

risk-map-small.jpgOrange County rose two slots in the national ranking of riskiest places to make a home loan, hitting No. 7 in the third quarter up from No. 9 in Q2, reports First American CoreLogic.

No. 1, again, is the Inland Empire and No. 2, also again, is Los Angeles.

First American CoreLogic says falling home prices and fraud are driving up the risk of delinquency. The nationwide Core Mortgage Risk Index is up 12% from a year ago and has increased for 11 of the last 12 quarters. Read the full report HERE.

The map on the right shows high risk areas in red (Yes that includes O.C.). Click on the map for a larger image.

And in related topics…

Posted in: Defaults & Foreclosures • Fraud • Risk | 21 Comments »

California ranks 2nd in mortgage fraud

August 28th, 2008, 9:48 am by Mathew Padilla

The Mortgage Asset Research Institute just released a report on mortgage fraud for the first three months of the year, and California ranked No. 2, behind the No. 1 state of…..Florida!

Coming in No. 3 was a three-way tie: Illinois, Maryland and Michigan.

The MARI maintains a database of reported incidents of fraud and misrepresentations, and the ranking is based on total number of properties involved in fraud (the totals were not given). Nationwide such reports were up 42 percent in the first quarter vs. a year ago. And here I thought fraud would decrease after the credit crunch began last summer.

Although the report didn’t break out Orange County, it said in California 52 percent of properties with “misrepresentations” are in the Los Angeles area.

Here’s more:

“Income and employment misrepresentation on the mortgage application rank high in Florida, California, Illinois and Maryland. Florida and Maryland report higher income than employment misrepresentation, and California and Illinois report slightly higher employment than income misrepresentation.”

And…

“The first quarter data reveals that loan application misrepresentation continues to plague the industry. According to the FBI’s 2007 Mortgage Fraud Report, ‘the downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market. Simply stated, mortgage fraud will not disappear — in fact, it is expected to significantly grow, evolve and penetrate new areas within the industry”

Read the full report HERE.

And in related topics…

Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |

Posted in: Crime • Fraud | 7 Comments »

Another mortgage-broker bill heads to the governor

August 22nd, 2008, 8:32 am by Andrew Galvin

A second bill aimed at strengthening regulation of mortgage brokers passed the state Senate Thursday and is headed to the governor.

This bill, SB 1240, “would enact a comprehensive series of mortgage broker reforms aimed at fixing many of the problems that helped create California’s current mortgage crisis,” said its sponsor, state Sen. Michael Machado (D-Linden), in a news release.

Here’s a clip from Machado’s release:

Existing law fails to provide the Department of Real Estate (DRE) with any information about the activities of its licensed mortgage brokers. Currently, DRE has approximately 360 staff to oversee over half a million licensees, and is unable to proactively prevent mortgage fraud.

SB 1240 will allow DRE to keep track of mortgage broker licensees, and to conduct audits and enforcement activities against those mortgage brokers whose activities pose the greatest risk to the public.

“Many of the problems we have seen involving mortgage brokers in California are not because there has been a failure in law. Rather its a failure of enforcement,” said Machado. “California’s Real Estate Law is one of the toughest in the nation. SB 1240 will transform our regulator from one that relies on consumer complaints to identify fraud, to one that is a proactive protector of borrower’s rights.”

On Wednesday, the Senate sent SB 1737 to the governor. That bill would, among other things, allow the DRE to ban unscrupulous individuals from working in real estate or related industries for up to three years.

Under current laws, the DRE can order brokers to stop doing bad things but has no power to enforce its orders.

Related posts:

Posted in: Crime • Defaults & Foreclosures • Fraud • Regulation | 3 Comments »

Bill to regulate mortgage brokers passes state Senate

August 21st, 2008, 8:43 am by Andrew Galvin

A bill aimed at making it more difficult for people like Jimmy Osborn to victimize vulnerable mortgage borrowers passed the state Senate yesterday and is headed to Gov. Schwarzenegger.

SB 1737 (which passed the Assembly on Monday) would give the Department of Real Estate the power to ban unscrupulous individuals from working in real estate or related industries for up to three years.

Osborn, whose crimes were detailed in a two-part series (part 1, part 2) in the Register this week, was ordered by the DRE in 2004 to desist and refrain from arranging mortgage loans without a real estate license. Nevertheless, Osborn was able to get hired by several Orange County mortgage companies before being jailed last year. Currently, the DRE doesn’t have authority to enforce its own orders.

According to the bill’s sponsor, state Sen. Michael Machado, D-Linden, the bill would also “prohibit a real estate broker from sabotaging a short sale in order to get the property listing when the property is up for foreclosure sale, and requires a real estate broker who brokers a mortgage, and helps facilitate a property sale as part of the same transaction, to notify everyone involved in that transaction about all of the roles the broker is performing.”

“What we’re trying to do is increase the level of accountability and the risk to the person doing business that way,” Machado told the Register earlier. “It’s not going to be foolproof, but it does close some loopholes.”

Posted in: Crime • Defaults & Foreclosures • Fraud • Legal problems • Regulation | 12 Comments »

Tips to avoid foreclosure prevention scams

August 20th, 2008, 12:05 am by Mary Ann Milbourn

Some homeowners are unnecessarily losing their homes because they thought they were getting help in avoiding foreclosure but ended up being the victim of a scam.

cg1bf.pngThe Federal Trade Commission suggests that homeowners who are in financial trouble and looking for help should avoid any business that:

  • Guarantees to stop the foreclosure process — no matter what your circumstances
  • Instructs you not to contact your lender, lawyer or credit housing counselor
  • Collects a fee before providing you with any services
  • Accepts payment only by cashier’s check or wire transfer
  • Encourages you to lease your home so you can buy it back over time
  • Tells you to make your mortgage payments directly to it, rather than your lender
  • Tells you to transfer your property deed or title to it
  • Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
  • Offers to fill out paperwork for you
  • Pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

For more information about foreclosure scams, CLICK HERE.

To read a copy of the FTC’s pamphlet, “Mortgage payments sending you reeling?  Here’s what to do” CLICK HERE.

Other foreclosure news…

Posted in: Distressed sales • Fraud | 5 Comments »

The man who caused 10 foreclosures

August 18th, 2008, 8:19 am by Andrew Galvin

james-osborn-resize.jpgRefinancing a home can be a complex, confusing process in the best circumstances. It’s harder if your mortgage representative is lying to you. His lies could cost you thousands of dollars in bogus fees or even your home.

People who relied on Jimmy Osborn learned this the hard way.

Osborn, a salesman who worked for several Orange County mortgage companies, stole $550,000 from his clients and caused 10 families to lose their homes to foreclosure.

Osborn’s story reveals the lack of protection for mortgage borrowers under state law.

To read part 1 of the story, click here.

For part 2, click here.

Posted in: Crime • Defaults & Foreclosures • Fraud • Legal problems | 13 Comments »

Feds launch SoCal mortgage scam squad

June 19th, 2008, 4:58 pm by John Gittelsohn

fbi-seal.gifA federal grand jury in Orange County charged three people with conspiracy to commit mortgage fraud, leading lenders to fund more than $50 million in loans, “with half of those currently in default or foreclosure,” said FBI spokeswoman Laura Eimiller.

The seven-count indictments are part of a Southern California initiative, nicknamed SCAM, to prosecute mortgage fraud, announced today by authorities in nine different federal agencies.

The local campaign is part of a nationwide effort unveiled today called Operation Malicious Mortgage, which resulted in 144 mortgage fraud cases charged against 406 defendants since March 1. The most prominent case was the charges unveiled today against two Bear Stearns hedge fund managers.

The Orange County indictments charged Gilma Ruiz and her brother, Francisco Ruiz, both of Las Vegas, and their cousin, Mario Hernandez of Los Angeles, with preparing false bank statements that helped mortgage brokers obtain loans from Orange County companies including Resmae Mortgage, People’s Choice Home Loan and Encore Credit Corp.

The three defendants could not be reached for comment. They are scheduled to make their first court appearance on June 23 to enter pleas in the indictmnent.

To read the 9-page indictment, CLICK HERE.

To see the FBI’s announcement, CLICK HERE.

Related stories …

Posted in: Crime • Fraud | 7 Comments »

Did mortgage fraud peak in 2007?

May 14th, 2008, 12:01 am by Mathew Padilla

The Federal Bureau of Investigation released an analysis of mortgage fraud that says fraudulent activity spiked last year.

The agency received 46,717 Suspicious Activity Reports related to mortgage fraud last year, up 31 percent from 2006. Just 7 percent of those reports included an exact dollar amount of loss, but that totaled $813 million.

The FBI said: “Our caseload has also escalated. By the end of fiscal year 2007, we were handling just over 1,200 mortgage fraud investigations—a 47 percent increase from 2006 and a whopping 176 percent increase from 2003.”

The types of fraud to watch for in a down market range “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,” the FBI said.

Yes, but these days lenders are looking more closely at documents of income andquestionmark.jpg assets of their borrowers, experts say. Such practices might be enough to offset growth in the scams mentioned above. For example, forget those so-called ‘liar loans,’ where borrowers just say what they earn and banks believe them if their credit scores are high enough. What do you think?

Will mortgage fraud keep climbing?
  • Add an Answer
View Results

Related Links:

Posted in: Fraud • Polls • • • | 4 Comments »

A brief history of the liar’s loan (and a poll)

April 25th, 2008, 11:54 am by Andrew Galvin

Slate’s Mark Gimein, who last week wrote an article that led to lots of comments on this blog, is back with another piece. This time, his topic is the stated-income loan, otherwise known as the liar’s loan:

It’s the simplest aspect of the crisis to understand and also the most troubling, because it’s not about complicated financial dealings and can’t be fixed with bailouts. It’s about an astounding breakdown of social norms.

Gimein traces the history of the liar’s loan, which began as a way for those who earned commissions or owned businesses or otherwise had unpredictable incomes to get loans. Yet it ballooned into a huge part of the mortgage industry during the latter years of the boom. The fallout is widely felt, he writes:

(C)onsider the position of borrowers in markets where close to half the people taking out mortgage loans were lying. Keep in mind that in some places (for instance, San Diego), half the people in the market were taking out stated income loans and so bidding up prices to points where almost any house became impossible to finance for someone who did not lie.

***

How big a role have liar's loans played in O.C.'s housing market?
  • Add an Answer
View Results

Posted in: Fraud • Polls | 48 Comments »

« Previous Entries