Mortgage Frauds Rampant in Florida

When the financial bubble burst, many people's lives went spinning out of control. Unfamiliar with the fallout they would be facing, homeowners were scrambling for information. Unfortunately, the unscrupulous scammers were just starting to gear up their machines to reel in the catch.

The FBI defines mortgage fraud as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan”, and there is a plethora of companies doing just that.

There are several organizations across the country that offer rescue plans for people in financial distress. However, incidents such as changing signed documents after the clients leave the office, or other acts of fraud, are all too common.

Some unethical companies may claim to be working in government-sponsored homeowner programs or agencies. Actual or fictional names of government agencies or other official-sounding terms could also be used as the scam artists do their best to appear legitimate.

There is help available for those who have been unfortunate enough to fall prey to these tactics.

If consumers think they have encountered a mortgage fraud situation, or are even suspicious, one of the first stops they can make is the Florida Attorney General's Office. A toll-free Consumer Hotline has been set up, and there is a variety of mortgage- and fraud-related information on their website.

Through its Division of Real Estate, the Florida Department of Business and Professional Regulation sets rules and guidelines for real estate professionals and exercises disciplinary authority. A Consumer Complaints Section is available to report any incidents people believe to be unethical or illegal conduct by real estate professionals.

HUD, the U.S. Department of Housing and Urban Development, also offers consumers the resources they need to make intelligent decisions when it comes to their mortgages.

Here are some points to watch out for when dealing with rescue recovery plans.

Avoid up-front fees:

One prominent scam in play is the requirement for up-front fees by mortgage rescue firms. Consumers facing foreclosure are coerced into paying fees for loan modification or payment rescheduling assistance. All too often, these companies are not legitimate and do nothing to prevent a foreclosure from proceeding. In the end, the homeowner loses the fee, receives no assistance, and forfeits their home.

Because so many have been victimized by this fraud scheme, governments at all levels have put the brakes on these exorbitant fees. The FTC (Federal Trade Commission) recently put out a consumer warning to avoid any company that asks for a large fee in advance, noting it is definitely a red flag to consider. These fees are prohibited in 20 states, with more to come.

While there are a large number of nonprofit agencies that do offer homeowner assistance programs under government sponsorship (usually through HUD), they charge little or no fee for their services.

Leaseback/rent-to-buy scams:

In order to get the consumer to sign on for this scheme, the scam artist offers a deal to have the owner turn over the deed to their property in exchange for a rent-to-own agreement. Supposedly, this will allow the owner to stay where they are and at some point in the future, reclaim their home. Unfortunately, once the deal is signed, the owner may find there are a number of hidden fees and penalties, making it easy for the scam artist to void the deal and evict the owner.

Debt-elimination schemes

In this scenario, the scam artist often claims to be able to eliminate the homeowner's debt by way of secret laws or other financial trickery known only to his company. When the homeowner buys into this plan, it usually involves a fee for advice, and the owner is convinced to halt their mortgage payments to participate in the false program. This puts the homeowners in a dire position as they end up in a far greater debt situation that is difficult to resolve.

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