What Is Foreclosure Fraud?
Foreclosure fraud refers to a type of illegal scheme—specifically, illegal schemes that utilize fake or misrepresented information, statements or promises related to foreclosure. Foreclosure fraud is designed to enrich the fraudster, whether they’re an individual or a company, by depriving the victim of the value of their property.
Who Perpetrates Foreclosure Fraud?
Foreclosure fraudsters are people who almost always have a large amount of specialized knowledge that they can use to defraud victims, often in ways that are hard to stop or detect. This can include people who are formerly or currently employed as mortgage-based or foreclosure-based professionals, including appraisers, bankers, assessors, brokers, creditors, and even attorneys.
This is why it is essential to know foreclosure fraud when you see it, and to be able to call it out and fight against it with the help of an experienced foreclosure fraud attorney.
Are There Different Types Of Foreclosure Fraud?
Yes, there are many different types of foreclosure fraud. The term “foreclosure fraud” can apply to a wide variety of different sorts of schemes.
Some of the most common foreclosure fraud schemes include:
- Foreclosure Fee Inflation: When a home goes into foreclosure, the homeowner has certain rights. One of those rights is to be served with a Notice of Foreclosure, or even multiple Notices of Foreclosure. Service processors—especially disreputable service processors—sometimes charge excessively high fees to serve these Notices of Foreclosure—sometimes up to thousands of dollars. For reference, the industry standard for service processors is to charge a few hundred dollars, at most, to serve official documents like Notices. This can be considered a type of foreclosure fraud, particularly since the extra costs of the fees get passed on to the homeowner facing foreclosure as part of the foreclosure judgement.
- Foreclosure Rescue Scams: Sometimes, homeowners in danger of foreclosure are targeted by individuals or companies offering “foreclosure relief”. This may come in the form of advertising material, cold calls/emails, or even in-person visits. The perpetrators of this sort of foreclosure fraud promise desperate people that they can save their homes in return for a fee. Once the homeowners pay the fee, which can sometimes be thousands and thousands of dollars, the fraudsters either disappear, or claim that the foreclosure process is already too far gone for them to save the home—information they would or should have known before even offering the service.
- Fractional/Fraudulent Ownership Transfers: A sub-set of foreclosure rescue scams, a fractional ownership scam is when a scammer—often a scammer company—convinces a homeowner that he can save their home from foreclosure. In exchange, they explain, all the homeowner has to do is sign over a fractional interest of their home to the scammer and pay a monthly fee. Once the homeowner has transferred partial ownership, the scammer company hires “straw homeowners”, to whom they transfer the ownership. The straw owners then file for bankruptcy, delaying the foreclosure process. Ultimately, though, the foreclosure process does continue, and this process does not and cannot save the home for foreclosure (as advertised by the scammer).
- Improper Foreclosure Ownership/Rental Scams: Often, when a house is foreclosed upon, the homeowners vacate or abandon the property. Improper ownership and rental scams are when scammers use forged quit claim deeds to make it look like they actually own the foreclosed, vacant property. Often, these scammers then rent the property out to unsuspecting tenants.
- Robo-Signing Foreclosure Fraud: This sort of foreclosure fraud, often perpetrated by banks and lending institutions, became infamous during the 2008 recession. There is a large amount of mortgage paperwork and documents that are supposed to be carefully checked and reviewed before a foreclosure can be put into motion. However, many banks/lenders utilized “robo-signing”, which is when unqualified people (or even an automated computer program) signed off on thousands of foreclosures a month without actually reviewing the paperwork on a case-by-case basis.
- Mortgage Modification Fraud: Another form of fraud perpetuated by banks and lenders, mortgage modification fraud exploits mortgage modification programs that the government created to help people stave off foreclosure and keep their homes. Lenders have been highly incentivized by the government to join these programs, but some then went on to defraud homeowners by not honoring loan modifications that were transferred from other providers, or demanding payments to negotiate modifications but never making those modifications happen. Sometimes this fraud is perpetrated explicitly to put homeowners into foreclosure.
If you are in the Mineola, NY area and you believe that you or a loved one has been the victim of foreclosure fraud, there is help out there for you. Reach out to Mineola Foreclosure Fraud Attorney R. David Marquez, PC today at (516) 478-9302 for an expert consultation.
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