Foreclosure Scammers Target Short Sales

Scottsdale, Arizona-based National Short Sale Center says more than 50 percent of the homeowners it is working with to secure short sales have been approached by “circumspect individuals or companies” proffering fraudulent foreclosure rescue services.

With 20 percent of the nation’s homeowners underwater, the Obama administration recently introduced a new component of its Making Home Affordable program, aimed at steering struggling homeowners who do not qualify for a federal loan modification toward short sales. The government’s new plan will pay a servicer $1,000 for completing a successful short sale and will pay the borrower $1,500 to assist with relocation expenses.

While a short sale can prove to be a practicable alternative to foreclosure, National Short Sale Center says many struggling homeowners are confused about short sales and fall for deceptive offers, including phone calls, letters, advertisements, and e-mails (also known as phishing).

Travis Hamel Olsen, president of National Short Sale Center, stressed, “Under no circumstances should anybody be paying an upfront fee to complete a short sale. Unscrupulous companies use myriad ways to take advantage of unsuspecting homeowners. Usually if the deal seems too good to be true, then it probably is.”

Foreclosure and loan modifications scams are a growing area of concern for lawmakers, investigators, and the industry. The Federal Bureau of Investigation (FBI) is currently looking into more than 2,100 mortgage fraud cases—a 400 percent increase from five years ago. The recently enacted Fraud Enforcement and Recovery Act of 2009 allocates $500 million to the FBI, Justice Department, Secret Service, and Postal Service to combat mortgage fraud.

The types of fraud circulating include sale-leasebacks, quitclaims, stripping homeowner equity, and misleading homeowners into signing over deeds. And with the administration’s mortgage relief initiatives and its recent push for modifications, dozens of bogus companies with official-sounding names and fake Web sites mimicking the fonts and layouts of government sites claim to help struggling homeowners modify their mortgages. Some unsuspecting borrowers have fallen prey to unscrupulous con artists that take them for up to $7,000 before disappearing.

Olsen said, “The fraud usually comes through in the fine print, but foreclosure rescue teams and highly suspect scammers are basically taking homes through a variety of means, resulting in foreclosure and eviction.”

My Commentary:

This article is a very clear example of why you should always operate with integrity and disclose everything in writing to your sellers. You should not take any up front money from distressed homeowners or take a deed from any distressed homeowners. Stay far far away from lease-backs.

This is why we use the State Approved Real Estate Purchase Agreement that is appropriate to the seller’s foreclosure situation when working with properties through an Agent.

In California, the California Association of Realtors (CAR) contract is referred to as the Notice of Default Purchase Agreement (NODPA). It has the California Required Notice to Cancel built into it.
In Florida, Use the FAR/BAR as-is contract and add the Florida Notice to Cancel addendum to it. You can find the Florida Notice to Cancel on the Bonus page of your VSSI members site.

It’s unfortunate that the unscrupulous investors make a bad name for the industry. The best thing you can do is operate with integrity, comply with your state laws and treat people the way you would want to be treated if you were in their situation.

Committed to Your Extreme Success,

D.C. Fawcett

Legal Disclaimer: D.C. Fawcett is not an attorney and this should not be considered legal advice.

Post from: Real Estate Investing & Foreclosures Forum

Foreclosure Scammers Target Short Sales

Philly Foreclosure Update supports D.C. Fawcett's comments and thanks him for providing us with this article

Never too big to fail

In the current economic downturn, there is no real comfort in size. Bankruptcy of large U.S. companies has been rising in the recent months. In the last 4 weeks, 8 companies with assets of more than $1 billion have filed for bankruptcy. In the previous 4 weeks, there were 5 bankruptcies of large companies. "Corporate revenue is down in the United States and when topline revenue is down, there's less money to spread through expenses," said Brian Hamilton, co-founder and chief executive officer of Sageworks, a financial information company. Hamilton expects to see more bankruptcies, particularly in the auto and real estate sectors, in days to come. According to Bankruptcydata.com, a provider of bankruptcy data, over 20 public companies with asset size of over $2 billion each have gone bankrupt this year so far. The 2 largest bankruptcies this year are and Chrysler with combined assets of over $130 billion.

Venture capitalists want exemption from new regulations

The Obama administration proposes to include the venture capital industry in its financial overhaul plan. The plan requires hedge funds and venture capital funds to register with the Securities and Exchange Commission, and make certain disclosures and become subject to inspections. The venture capital industry believes that equating it with hedge funds is not correct, and they are not part of the problem which led to the current crisis. "Hedge funds may be different, because they short sell and time the market," said Robert Stefanowski, Chairman of 3i Group PLC's North America unit. "But private equity focuses on more long-term investment."The National Venture Capital Association (NVCA), the industry association of venture capitalists, says the industry is "relatively inconsequential" in the financial industry, and does not contribute to systemic risks which the reforms are supposed to tackle. "We believe that the entrepreneurial risk associated with the venture capital indus
try is not relevant to the systemic risks which the Administration is hoping to mitigate with this reform," said Jennifer Connell Dowling, vice president at NVCA.

Will reforms hurt banks' profitability?

President Barack Obama unveiled financial reforms this week with the objective of strengthening regulatory authorities and preventing another credit crisis. The reforms call for greater capital restrictions and increased supervision on investment vehicles, leading to reduced leverage and risk in the banking system.

Analysts are concerned that the proposed reforms may impact profitability and competitiveness of banks. "These regulations are so sweeping, so comprehensive and so expensive there's no question about the fact that they will lower the profitability of the industry," says Richard Bove, banking analyst with Rochdale Securities. "As part of these regulations there's a demand to increase capital almost consistently, which lowers the leverage of the bank and lowers its potential profitability." Standard & Poor's, a credit rating agency, has cut its ratings for 18 banks since it expects volatility to remain in the financial sector and the industry to face tighter regulatory supervision. Some analysts say that the government is attempting to increase its control over the entire economy. "These regulations strike me as a floor not a ceiling," said Dave Lutz, managing director of trading at Stifel Nicolaus. "They're going to continue to over-regulate as they see fit and branching out from banks to everybody that has systemic presence in the marketplace."

Mortgage rate drops; will it stay low?

Freddie Mac said the rate for 30-year fixed mortgage dropped 0.21% to an average 5.38% for the week ending June 18. Mortgage rates have been on the rise in the last few weeks, and had reached their highest since last November in the previous week. Mortgage applications dropped as the rates increased, and analysts were concerned if the rise in rates will kill housing recovery. "Concerns about eventual inflation drove bond yields and mortgage rates higher in recent weeks," said Greg McBride, analyst at Bankrate.com. "That has been tempered by the reality of continued weakness in the economy." The drop in rates comes as a relief to the industry. McBride believes that the rate will stay range-bound until the economy recovers and the borrowing rate will not be an impediment to home buyers. The Federal Reserve plans to buy up to $1.25 trillion of mortgage-backed securities this year in order to keep mortgage rates low. "Make no mistake, these rates are low and they're going to stay
low," said McBride.