On Deed Theft

        Whether you are a Realtor, title attorney, settlement agent, or lender, your clients rely on you for expert advice to assist them on multiple occasions. I am not the first person to encounter a prior client seeking to refinance their mortgage on a property that we conducted the settlement, or encounter a former client now looking to purchase investment properties. It is our responsibility to inform our clients, even potential ones, of the risks to consider when decision-making. Likewise, the accuracy of the advice we provide becomes our reputation.

        The real estate industry has become well aware of the growing threat of wire fraud and how to educate our clients about it, but can you define another scam just as deceptive and harmful—deed theft? Deed theft, also referred to as “foreclosure fraud,” has generated thousands of complaints in the U.S. from homeowners who have lost their homes to fake “foreclosure rescue” companies, not to mention suffered combined losses in the hundred millions as a result. Though the Federal Trade Commission and the Federal Consumer Financial Protection Bureau have won civil judgments against scammers, collecting the judgments is challenging. Recovery for the homeowner victims, if any, frequently comes from agency victim relief funds. Meanwhile, the number of scam complaints and financial loss is on the rise.

        Do you know the “red flags” and deceptive tactics used by scammers to obtain title to property? Test your knowledge and keep reading! The more you know, the better you can advise another in investigating a likely scam and avoiding an unintentional property transfer, along with worsening an already stressed financial situation.

Over the years, there has been a rise in fake housing assistance businesses that target the elderly, homeowners already in foreclosure, and individuals with low incomes.

A. How scammers make money by offering fraudulent mortgage services:
        Consider this example: You are a homeowner. You have fallen behind in your mortgage payments and are facing foreclosure. A company (the Scammer) calls you and identifies himself as a “forensic auditor” who works with “forensic attorneys”, and offers to review your loan documents for errors that the lender may have made regarding your loan. The Scammer says: “You can avoid foreclosure. Your mortgage payments will be reduced or even better, the entire mortgage debt will be released.” Why? An error made by the lender may qualify under a “loophole” that entitles you to escape the mortgage. With our help, you can get out of the mortgage. All you have to do is pay premiums for our “services.”

        
You provide your loan documents and pay an upfront premium. The Auditor-Scammer finds a “mistake” in the paperwork (of course) and offers to sue the lender on your behalf on the basis of the “loophole.” The Scammer bills you a second time to begin work on the lawsuit. You pay. Time goes by and you receive no update on the status of the lawsuit. You call the phone number on the company letterhead ten times and no one answers. You search online and find no company website. You also find out that the address on the letterhead is fake. Certainly, one can guess how this ends, and how much money you, a trusting homeowner in a poor financial situation, will have paid only to discover that the Scammer has lied about your mortgage options and done nothing toward improving your financial situation. In fact, you are worse off.

B. How your home becomes a target:
        Some scammers aim for more than a few payments—they want your house. They too prey on borrowers who are behind on their mortgage payments and foreclosure proceedings have commenced. The Scammer voicemails and letters state: We will help you “save” your home, avoid foreclosure, and legal fees. We will reduce your monthly payments. How? We’ll modify your mortgage. Our loan modification procedures are approved by the Department of Housing and Urban Development. We have a one-hundred percent (100%) guarantee that you will get your loan modified. Moreover, you can stay in your home during the modification process.

        Some scammers charge an upfront fee for their “services.” They may advise you to quit making mortgage payments while your loan is “renegotiated,” making a bad situation even worse, or require you to make mortgage payments directly to them while the loan is in the process of being “modified.” Even more skeptical, the scammer will insist that you keep all communication regarding the loan modification confidential and require that you stop working with any other attorney, company, or mortgage counselor providing assistance.

In order to get the mortgage “modified,” the Scammer will tell you: Your home needs to be “temporarily re-titled” under the name of another company (or person) for ninety days (some closed period of time) because of your poor credit. Once title to the home is “temporarily” transferred to the “holding” company, you will be charged rent to stay in the home during the “leaseback” period, while the loan is being modified. They promise that: After the loan modification process is complete, the property will be titled back into your name. . . . .

        Don’t be fooled! Once you deed away your ownership interest, the Scammer, who made promises of debt relief and without any risk to your home ownership, sells the property and often disappears. When you call the Scammer for updates, you will be informed that more time is necessary or that the modification process was not approved, or more likely, not receive any response. What is worse is that you, now a former homeowner, are still responsible for your mortgage debt. Moreover, any money you gave the Scammer toward your mortgage payments, rent, and their “services,” is gone. If you are lucky, the Scammer will pay you some money for the home (nowhere near its value), but that is no silver lining when the notice ordering to vacate arrives at your door, as well as the new property owner.

        A few minutes of research can prevent the crisis of losing likely your largest investment (your home) and your money sent to a scammer. Be aware that some scammers use in their advertising words related to official United States government programs, such as “Federal,” “TARP,” or “HUD,” making it seem as if their “programs” are approved by or affiliated with the government. Some scammer websites even use federal emblems or logos to make the company appear legitimate. Do some research! Do not be satisfied with the website, which may be a sham. Double check whatever facts or promises you are told with your lender. Your lender will know whether you qualify for any government initiatives to prevent foreclosure. Your lender will tell you that you must get approval from them to send mortgage payments to a third party. Your lender will tell you that you cannot convey your interest to another party and become relieved of your mortgage debt.

        Your mortgage company or a State-approved housing counselor will not and cannot charge a fee for mortgage assistance counseling. The Maryland HOPE Initiative (http://www.mdhope.org) provides a list of these state-approved, non-profit counselors and attorneys. Moreover, the Maryland Department of Labor, Licensing, and Regulation provide additional resources for homeowners facing foreclosure and suggestions to improve financial management (https://www.dllr.state.md.us/finance/consumers/mortforeres.shtml).

        If something sounds too good to be true, it likely is. This is the case for “mortgage relief” and “foreclosure rescue” companies who use every line in the book to make reducing mortgage payments or releasing a mortgage seem simple, and most of all, risk-free. Wrong! These companies, unaffiliated with Federal or State government, prey on homeowners who are in a desperate financial situation and who are uneducated about their options.

If you become aware that a mortgage relief company has contacted another and promised that their mortgage debt can be wiped out or reduced, encourage them to always verify any statements with their lender before signing anything or sending any funds. Explain the “red flags.” To name a few: “forensic auditors” do not have the authority to change loan terms; without lender approval, mortgage payments cannot change; mortgage payments should only be made to the lender (unless the borrower has received a notice of servicing transfer and confirms with the initial lender); lenders and government-affiliated agencies do not charge fees for mortgage counseling and in fact, should be consulted initially when a borrower has trouble making their payments. The likelihood of getting all of the money back that was spent towards a scam, as well as the full value of a home if title was transferred, is not likely, and will not be recovered quickly.

A borrower must always exercise caution when a party outside of their lender contacts them to take any action regarding their loan, not to mention the title to their property—the risk of not doing so is too high. Likewise, as agents and advisors, when the circumstances point towards a possible scam, it is our responsibility to point out the issue and educate clients on the “red flags”, how to confirm advice they received, and how to report a scam (report mortgage relief or foreclosure rescue scams to the Office of the Commissioner of Financial Regulation, https://www.dllr.state.md.us/finance/).