Foreclosure Scams are Keeping Pace With Increase in Foreclosures
October 29th, 2009
Millions of Americans are set to lose their homes during the forthcoming years. The administration is gearing up to tackle the menace of foreclosure scams that are keeping pace with increase in foreclosure numbers. Lawyer Michael Chung referred to it as a “tidal wave” of foreclosure rescue scams. He said, “We were set up to help people deal with various legal issues. But almost every single call I get is related to rescue scams.”
During the period of the housing boom the scams were of a different character. The banks became heavily involved in easy lending – an irresponsible attitude that permitted the borrowers to contract mortgages without making any down payment and without providing any proof of income. This planted the seed for later fraudulent activities to sprout.
The sub-prime free-for-all partying, allowed shady characters with criminal background to join hands with mortgage agents and appraisers of property. Houses were bought and sold at the drop of a hat – this being known as flipping. Huge profits were netted overnight as property prices continued to spiral. Often the buyers were ‘straw’ or non-existent.
Todd Lackner investigating mortgage fraud in San Diego said, “Sub-prime fraud played a huge role in the housing crisis. Bank employees must have recognized individual cases of fraud but no one was looking at the whole market and realizing this was an epidemic.” The epidemic paved the way for the housing crisis. This in turn was the prime cause for pushing the largest economy in the world into recession.
Recently there have been signs of a slow recovery in the housing sector but reports are pouring in of rising unemployment and increase in foreclosure numbers. A potential flood of foreclosures is poised to break out. It will cause more pain and further decreases.
Last April the FBI brought charges or mortgage fraud against 24 persons in San Diego. In all 220 properties were involved that calculated to sale price of $100 million. Across the nation the FBI noted that during September it had 300 of its agents handling 2,600 fraud cases. 8 agents were busy only with San Diego cases.
As the foreclosure crisis advanced it became a veritable gold mine for scammers as they began to pick on vulnerable borrowers desperate to get out of the quicksand. The scammers charged fees. Often these fees per individual were small – around $8,000. But added up these calculated to a tidy sum. FBI noted that in 63% of the cases the loss calculated to more than $1 million but the total number is still not clear.
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