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5 New Fraud Schemes Identified

January 30, 2009

The current economic environment has brought mortgage fraud to a whole new level. Con artists are preying on lenders, borrowers and vulnerable homeowners in danger of losing their homes.

According to the FBI, the five most popular scams today include:

  • Builder-Bailout Scheme – When a builder offers an incentive of a mortgage with no down payment, he inflates the value of the property to cover the down payment so the mortgage loan that is taken out actually covers the entire cost. For example, the home costs $100,000, he inflates it to $120,000, has the borrower take out a loan for $100,000 and claims the borrower gave him $20,000 as the deposit towards the home.
  • Seller Assistance Scams – The con artist negotiates the lowest price possible on a property from seller’s who are anxious to sell and then has an appraiser inflate the value. After obtaining a mortgage loan on the inflated price, the seller is paid the lower agreed upon sales price and the difference is pocketed by the buyer.
  • Short Sale Scheme – This is a premeditated short sale where the home is sold by the lender for less than what is owed (pre-foreclosure). Unbeknownst to the lender the home was initially bought by a straw buyer for the purpose of a default so the con artist can swoop in and offer to purchase the property in a short-sale agreement – getting the property for well below its value.
  • Foreclosure Rescue Scams – The fraudster offers to help keep the homeowner in his home, essentially saving them from foreclosure through deed transfers and payment of up-front fees. Sometimes, deeds are forged and without the homeowner’s knowledge the home is refinanced, the equity stripped and gets foreclosed on anyhow.
  • Identity Theft on Home Equity Lines of Credit – Using the Internet, telephone, faxes and other technology, the thief poses as the customer to establish an account and access its funds. Sometimes, going as far as having the phone number of the real customer forwarded in case the lender calls to verify the transaction.

Read story at Tri-State Defender Online

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