Mortgage loan fiasco spawns outrageous fraud and deceit
As a state director of the California Association of Realtors, I spent most of last week attending meetings in Sacramento. As usual, the thousand-plus of us present heard about new laws, legal cases, changes in forms, Multiple Listing Service (MLS) updates and a forecast for California real estate.
Different and shocking, however, was the reported prevalence of unethical practices aimed mainly at the elderly and those who speak little or no English. Most of this bad stuff is happening in southern California and the rural, northern part of the state. The worst cases involve three types of scams:
Foreclosure scams – Real estate seminars and direct phone solicitations promise to save the house for owners in financial trouble. They tout dubious schemes, such as land grants and fractionalized deeds. At the end of these seminars, many attendees line up and, unknowlingly, sign away the deed to their property with no compensation.
Rental scams – Sleazy operators look for vacant homes on the market. They remove the “For Sale” sign, cut off the lockbox, remove the keys and re-key the locks. At that point, they quickly show the property as a rental to prospective tenants who have responded to a rental ad on sites like Craigslist. They then collect first and last month’s rent, plus security deposit, from one or more duped, would-be tenants.
Reverse mortgage scams – Elderly homeowners are talked into egregious reverse mortgages that provide security only to the shysters perpetrating the fraud.
Meanwhile, in some short sales, junior lienholders have been trying to have the financially troubled homeowner sign a document accepting personal responsibility for the junior loan. If it is a second loan that was secured at the time of purchase on a one to four unit, owner occupied, property, this is called a “non-recourse loan.” That means that only the property, not the buyer’s assets, are considered security for the loan. Despite that, some unscrupulous lenders have been successful in duping naïve homeowners in short sale scenarios.
Except for the rental scam, I have not heard of these kinds of problems in the East Bay.