6 mortgage-refi scams and the lessons you can learn from them
Here are some of the tactics and schemes out there and how you can recognize and avoid them.
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Refinancing a home is a nerve-wracking, confusing process, and one that can leave even the most financially savvy borrowers vulnerable.
While new consumer regulation — part of the Dodd-Frank financial overhaul — will better protect borrowers starting in early 2014, mortgage scams are always shifting to adapt to changes in regulations and the economy. (Bing: Learn more about the Dodd–Frank Wall Street Reform and Consumer Protection Act)
"Fraud never goes away," says Ann Fulmer (no relation to the reporter), vice president of industry relations for loan-review company Interthinx in Atlanta and a long-time mortgage-fraud expert. "It just changes form."
And fraud is once again on the rise. The Interthinx National Mortgage Fraud Risk Index jumped 16% from the third to fourth quarters of 2012, the last period for which data is available.
Here are six common refinancing rip-offs, along with the lures con artists use to draw in their victims:
1. Advance fee for refinance schemes
The appeal: "I can solve your financial problems in a way you can't."
For newly divorced Connie Bries, who had recently seen her Dubuque, Iowa, janitorial business crumble, the phone call from "Legal Advocates" who claimed to be working for her lender, JPMorgan Chase, seemed like a blessing — a way to refinance her large mortgage so she could better afford it.
- MSN Money: Try a refinancing calculator
First, the firm asked for a $3,800 payment to get her into a Department of Housing and Urban Development refinancing program for single mothers. She paid a lawyer to review it, and he told her the request was legitimate. Over several months, Legal Advocates asked Bries to make her mortgage current by paying her back payments to their "resolution center" instead of Chase.
After months of waiting, she was no nearer to resolution — and a lot closer to foreclosure. When Legal Advocates asked her to submit the same payment twice because they had not received it, she canceled the first check and submitted a new one. The firm then tried to cash both, her bank told her. When she called to confront her contact at Legal Advocates, she said, the lines were disconnected.
- On our blog, 'Listed': Consumer bureau finalizes mortgage rules
"It has just been a living hell," Bries says of the ordeal, which cost her about $20,000 and forced her into bankruptcy.
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The scam that Bries fell for is just one of many fee-for-refinance schemes out there, Fulmer says.
Another one making the rounds with many underwater homeowners is the "forensic loan audit" or "mortgage compliance audit," in which scammers promise to review your loan documents in search of violations that will make the loan invalid and get you off the hook for paying it.
In many of these cases, con artists do nothing for the homeowner, instead letting the home slide further into default so they can pick it up for a song in a fraudulent short sale or "flop."
The lesson: Talk to your lender, rather than outside companies. New regulations require the nation's largest banks and servicers to institute a single point of contact for delinquent borrowers. And never pay any funds upfront to a third party.
"If they get a fee upfront, they are taking advantage of you right off the bat," says Mark Lansing, a counselor with Consumer Credit Counseling of Northeast Iowa who has been working on Bries' case.
Moreover, just because a firm has a "dot-org" Web address, or claims to be part of a government program, such as the Home Affordable Refinance Program (HARP), that doesn't mean you should trust it.
2. Land-trust scheme
The appeal: "Give us the power to work on your behalf and renegotiate your mortgage for you."
This scam is just a variation of fee-for-refinance, but with a worse result. Con artists say they will get your loan refinanced but that they need to put the property in a trust so they have the power to deal with the bank on your behalf. Some even charge an advance fee for their time.
Alternatively, they say they can secure better refinancing terms if your name isn't on the deed. They promise that you can remain in the home as a renter until the refinancing is finalized and the property is transferred back into your name. In the meantime, they borrow against the home or prepare to sell it and evict you.
In either case, the victim winds up handing over the title to his or her house, and the negotiating entity never has any dealings with the bank that holds the mortgage.
The lesson: Never put property in a trust or in anyone else's name. You are essentially handing them the keys for good.
Really? This is all happening again? Or more likely `still` happening.
< ..sigh.. > How quickly we forget. Just like the Powers That Be expect us to do.
I agree 100% with Jawbreaker. I went to the bank for a line of credit which I only needed approx. 4M.
The gal there all bubbly etc. said how much do you need, hmmmm $30,000. You don't have to use it but we can write it for that. It was a loan I could not get out from under, even if I paid towards the balance. It was compounding quicker than I could catch up. Of course, because of this, go figure, I had to then ask for a refinance. They knew this would bury me to begin with. I have been in my home for 27 years. They put $35,000 on top of my $50,000 mortgage and now will not provide me with the documents to prove deductions or pay-outs in the total amount for the line of credit in the amount of $35,000. I have filed with CFA. It costs $6/page to obtain copies of records.....another maggot move.
According to Huntington Bank I owe $95,000 on a mortgage which was at $50,000. P.S. They also ruined my credit. In the end, I will have to hire the services of an attorney. Just realize people, the banks are in it to make money......are they paying anything on your savings accounts? Absolutely not and haven't been for many years. They are not do the public any favors.
Just closed on a great refi with American Equity in Cary NC. Went from a 20 yr 5.5% to a 15yr 2.8% . Process took only 6 wks, no hidden fees or scams, AND there was only one person at AE that I had to talk to and deal with throught the entire process! He made suggestions that I use my own attorney to save money and found a better title insurance person that saved me 1K. I would highly recommend American Equity MOrtage co in Cary, NC. Ask for Marsahl Newton or Ted Wilson! Everything was done by email and telephone! NO STRESSORS!
I attempted to refi with Wells Fargo 2 yrs ago and after the 5th different person asked me to fax them the same piece of paper to a different fax number, I gave up. Told them I quit, they were stressing me out too much. Wells fargo is TOO big of a biz and it takes a long time and way too many people involved!
Just Help - MJ Anton in FLORIDA is a SCAMMER. Paul Moise of AMG in Jacksonville FL(name varies depending on the day and scheme being pitched) is a SCAMMER. These creeps take peoples money & give them a song & dance. NO ONE has ever gotten a loan mod out of these people. The NEW SCHEME is a Principal Reduction Program. NO such program exists! IT IS A SCAM. Deal with your lender and NEVER, NEVER, NEVER pay up front. Federal Laws PROHIBIT fees being collected in advance. And if you've been taken (even by the nice, little old lady), file a complaint with every agency you can think of. If you don't know who to file with, start with your States Attorney. They will forward to the correct agency. Good luck & NEVER, NEVER, NEVER, pay in advance.
John Somers - Adventure Mortgage CANNOT be trusted. Please, please do not entrust John with any matter related to your finances or your money. He is a very dishonest, unscrupulous, immoral person regardless of his affiliation with church, 'perceived powerful' entities in the community, etc. He is extremely self-serving and will go to any lengths to make money in any way possible. John will not hesitate to destroy your life.
Cohorts named in previous post as well.
In 2006 I was defrauded by Homecomings Financial who was owned by GMAC. When Homecomings went under GMAC took over my loans. The Mortgage Broker, John Somers of Adventure Mortgage, along with David Karcher of Homecomings/GMAC stated terms to me which were then set-out in my Good Faith and Truth-in-Lending Statements. At the closing table certain facts were not clear. I, in front of witnessses, questioned the terms which were explained to me, in detail, by John Somers, David Karcher, the closing attorney-Stuart Garner who was on the phone with another Homecomings/GMAC rep who, as Stuart defined, was in complete agreement with what was being represented to me. Certain documentation was promised to me which I was told would outline the stated terms in more precise detail. I signed the Note under the guidance of John Somers, David Karcher and Stuart Garner - IN BIRMINGHAM, AL. Upon receiving my first Statement, in Feb. 2007, there were discrepancies which prompted me to phone Homecomings/GMAC with said discrepancies never being explained. I was and have since been treated with such ongoing abuse by GMAC it is incomprehensible. I AM A SINGLE WOMAN ATTEMPTING TO CARE FOR MYSELF AND MY 80 YEAR-OLD MOTHER. I HAVE WORKED EXTREMELY HARD ALL MY LIFE TO ACCOMPLISH THE PURCHASE OF MY HOME.
The promised documentation outlining the precise details never arrived. GMAC began to immediately threaten foreclosure, although I was in touch with Tony Renzi/CEO, attempting to act in GOOD FAITH. Tony Renzi and other executives with GMAC have tortured me since 2007. I was forced to file a lawsuit in April, 2007 in an effort to save my home and to protect me and my Mother. Mother and I have compounded health issues related to this horrific, torturous situation perpetrated upon me.
All of the persons named are criminals and MUST be punished. ALL PERSONS INVOLVED IN FRAUD, MISREPRESENTATION, ETC. WHO ARE CLEARLY SCAMMING GOOD PEOPLE AND, THEN, PUTTING US OUT OF OUR HOMES SHOULD BE IMPRISONED JUST LIKE BERNEY MADOFF. THEY ARE NO DIFFERENT IN THEIR GREED, BAD FAITH AND RELATED CRIMINAL ACTIONS.
I have contacted the U.S. Attorney, the FBI who have told me to contact the FTC, etc. We ALL know the FTC is in coercion with the Lenders as is our Government in general.