Mortgage Fraud: The Scams That Hit You Where You Live

Mark Mandell, Esq.

Mortgage fraud is one of the hardest-hitting scams in the US, and it threatens the dream of homeownership for all too many people. Michigan is among the top states for known or suspected mortgage fraud activity, based on recent law enforcement and industry data.

These scams are especially tricky to combat, as they readily adapt to economic changes and adjustments in lending practices. Mortgage fraud comes in a few forms, primarily: predatory lending, criminal mortgage fraud, and foreclosure rescue scams.

Predatory lending is essentially unfair and deceptive practices on the part of lenders during the loan application process. This can included misleading marketing tactics and incentives for selling risky loans. Recently in Michigan, Countrywide Financial and Ameriquest Mortgage Company settled cases with the state’s Attorney General’s Office worth over $130 million and $13.8 million respectively, providing restitution to consumers.

Criminal mortgage fraud involves the use of artificially inflated appraisals and straw buyers to gain mortgages greater than the property value. The criminals take the extra money from the mortgage and leave the straw buyer out to dry with a mortgage they cannot afford and property worth far less than the mortgage amount.

Lastly, foreclosure rescue scams exploit consumers at times when they are most vulnerable – when they and their families may be forced out of their homes. These “foreclosure rescue companies” take up-front payments to “work with your lender,” and most never deliver on their promise. In Michigan, the Credit Services Protection Act made it illegal, in most cases, to take money up front in exchange for negotiating with your lender. The CSPA is enforced by the Attorney General’s Office, and you can watch out for their consumer alerts on foreclosure scams here: http://www.michigan.gov/ag/0,4534,7-164-17337_20942-215058--,00.html

So how do you avoid mortgage fraud as a consumer? Some steps may require more work at the outset, but they will save you future aggravation and distress from potential fraud. First, seek out referrals for real estate and mortgage professionals when you want to buy or sell a home – and once you are referred, do your homework on them. Also, do your homework on what other homes in the area have sold for.

If it sounds too good to be true, it probably is: Beware of “no money down” loans. These loans are meant to trick people into buying homes they really can’t afford. Therefore, also know your own price range and have an idea going in of what you truly can afford both up front and in the medium and long-run. And finally, don’t let the realtor or mortgage broker force you to make false statements or sign your name to blank documents or documents with empty lines – these are sure signs of potential scams.

For more information on how to protect yourself as a consumer from mortgage fraud, check out the FBI’s website, here: http://www.fbi.gov/news/stories/2008/august/mortgagefraud_081408; and the Michigan AG’s consumer alert website: http://www.michigan.gov/ag/0,4534,7-164-17337_20942-215058--,00.html.

You can read the entire article at:

https://www.michigan.gov/documents/ag/Attorney_Generals_Office_Fights_Predatory_Lending_346680_7.pdf

If you have questions about mortgage fraud or other legal issues, please contact Mark Mandell or Tariq Hafeez at 248.380.0000 or online at www.MichiganFraudLawyer.com.