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11/14/11

Mortgage Scams in a Weak Housing Market

In today's Wall Street Journal:

"Fraudsters will always finds ways to scam lenders and homeowners. And in recent years, they've shifted their tactics to profit from the market's downturn.

Today, there's less identity fraud and misrepresentation of income or employment to obtain a mortgage, mainly because of stricter validation criteria, says David Johnson, vice president of fraud and consortium solutions for CoreLogic, a provider of financial, property and consumer information. But other types of fraud are replacing those scams. Here are three:

1 FORECLOSURE RESCUE

Schemes that prey on struggling homeowners heading toward foreclosure are "the cash cow right now," says Yolanda McGill, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers' Committee for Civil Rights Under Law.

Some fraudsters are peddling services such as preparing documents for a loan modification. Others claim to be an attorney or say they are working with an attorney. Often, these offers sound legitimate, echoing some of the same language used by government programs and lenders to gain a homeowner's trust.

They offer a service, take the homeowner's money, then disappear, Ms. McGill says.

The Mortgage Assistance Relief Services Rule, in effect since January, prohibits firms that offer mortgage modification or mortgage relief assistance from accepting upfront fees, Ms. McGill says. So homeowners should never pay before services are rendered. There's an exception for attorneys, causing some scammers to pose as representatives of law offices, she says.

Other scammers try to get homeowners to sign a quit-claim deed, which transfers ownership of the home to the scammer, who promises the homeowner a situation where he or she will be able to remain in the home, Ms. McGill says. In a newer scam, those who have already lost their homes are being approached to pay money to get the home back, she adds."

Read the full WSJ article here