If It Smells Fishy...
It never ceases to amaze me the level of creativity that exist out there when it comes to those who would use illegal means to capitalize on a shifted or down market. The internet has spawned a new level of sophistication to the scams of yesterday. And today, the buyers and sellers would be well advised to ask questions and look before they leap.
It should come as no surprise that currently the vast majority of fraud occurring is in the short sale and loan modification arena. This niche market (which currently represents over 50% of the transactions in our area) has been inundated by those who would use fraud and deception for their own financial gain to the detriment of those on whom they prey.
In November of 2010, the Federal Trade Commission (FTC) implemented the Mortgage Assistance Relief Services (better known as MARS) act in an attempt to protect distressed homeowners from the ever increasing list of foreclosure relief scams.
The primary function of this new rule is to make it illegal for any Mortgage Relief Company to charge upfront fees of any type until or unless they have provided the troubled homeowner written shortsale approval complete with terms that are agreeable to the seller. In addition the service provider must also provide the distressed homeowner (in writing) with full disclosure of all changes, modifications, and new terms of the mortgage. Or, if applicable, the terms under which the lender will cooperate with a shortsale. And, at this point the seller must agree to all of the specified terms and conditions of lender approval prior to fees being due and payable to the Mortgage Relief service provider.
Another area of fraud is perpetrated through the unwitting cooperation of the buyers and sellers of a transaction. If you are a seller and you are promised payment outside of escrow that is considered to be fraud on the lender and is a federal offense.
Consequently if you are a buyer who is asked to pay for certain fees outside of escrow to avoid showing those payments on the final HUD. That also is considered to be loan fraud. In etiher case my advice is simple…Don’t do it.
Over the past 18 years I have often been challenged by my clients as to the need of title insurance. And there were times when I was stumped for an answer that really had teeth. Today, I have answers that will certainly make you appreciate the value of this product.
First let me tell you of a story I heard involving a home purchase at the courthouse steps (at the foreclosure auction). The investor properly doing his due diligence prior to bidding on the property inspected it and found the home to be vacant.
When he won the property at auction, he immediately went to the property only to find it occupied. The occupant had what appeared to be a valid lease. And, immediately called her “landlord” and requested that she come to the home to clear up the situation. As an aside the Sheriff’s department was called to effect eviction of the unauthorized occupant. The officer upon viewing the lease refused to be involved stating that this was now a civil matter.
When the “landlord” showed up, she had in her possession a notarized and recorded deed to the property from her to herself. Obviously this will be a relatively simple matter to unravel. But even so, will require legal action and time. All of which cost money.
In another situation a property was advertised for sale by an unwitting real estate professional as being free and clear. The seller had a recorded re-conveyance document from the lender and the home sold.
In short order the new owner was notified that the home was in foreclosure by the sellers lender. As it turns out the re-conveyance was a forged document. One so convincing that the title insurance company in question believed it to be valid. Without a title insurance policy in place, this buyer would have been devastated financially.
Document forgeries are becoming much more prevalent. In some cases the scammers are so adept at deception that they are able to determine the home state of an absentee owner and create notary stamps that appear to be from the home state of the absentee owner so that they can transfer ownership of the property without the knowledge of the homeowner. These homes are then resold. And once again without a title policy the financial impact on the defrauded buyer could be devastating.
I regularly offer the following advice to the agents in my office, which I now offer to you. If it doesn’t pass the smell test, don’t move forward without having your concerns fully appeased.