“Foreclosure rescue” scam exposed by mortgage fraud expert

By David F. Ashton

The Bee, Jan 30, 2008, Updated Oct 30, 2009 (3 Reader comments)

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· Delay the homeowner from taking any action until the very week of the foreclosure auction;

· Describe the transaction terms orally — not in writing — to the homeowner;

· Prepare documents to favor the “rescuer”, regardless of what was told to the homeowner; and

· Induce the homeowner to sign incomplete or blank documents.

“These crooks take care to make sure that no specific step they take in their process is illegal,” stated Hagar. “Some foreclosure rescuers seem actually to think they are helping people. The real question is, at the end of the day, who gets the equity? The homeowner or the rescuer?”

Addressing the flood of offers nowadays seen on yard signs and Internet sites that offer to “eliminate your mortgage” — Hagar advised considering this concept carefully before taking any action. “Realistically, there is only one way to eliminate a mortgage,” Hagar said, “and that is to pay it off. If you sell your home to pay off your mortgage, you can’t live there.”

“Flipping” houses

“There’s good flipping, and bad flipping,” Hagar continued. “A good flip is when you research and buy an undervalued house, fix it up, and sell it for an increased value.”

But, even instructions for “good flipping” — as glamorized by TV shows such as “Flip That House” — don’t mention, Hagar said, that flippers often get stuck holding the house and losing money.

But worse, Hagar informed his audience, is the “bad flip.”

“A scammer buys a house at or below property value. They may make some cosmetic improvements, but don’t substantially improve the property. Then, they jack the price way up.”

With the help of shady real estate agent and mortgage loan originator — and an appraiser bullied into “passing” the home by the bank — the “flipped” home is sold to an unsuspecting buyer, typically one with a poor credit history. “Buyers get stuck with a bad house, their credit is wrecked, and usually the bank gets stuck with a foreclosure.” (All this may help you understand some of the current “subprime mortgage meltdown”!)

“People do tell lies to get a place to live,” Hagar stated. “People do commit fraud because they want property or cash.”

The biggest lie a cheating consumer will tell is overstating their income. “Don’t do it, even if originators tell you to do it. You’re the one breaking a federal law by lying; you’re the one who will face the consequences. More than losing your home and equity, you can go to jail.”

Other forms of dishonesty perpetrated by those trying to get a mortgage include providing false statement of assets or source of down payment, and inflating sales prices to cover non-real-estate items.

Hagar summed up his presentation: “Deals that seem too good to be true usually are! Read your documents, ask questions, and get legal help with real estate transactions when you need it.”

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