Mortgage Scam to Clean Up a Mortgage Scam to Clean Up a Mortgage Scam
We saw how homeowners were scammed into taking sub-prime mortgages & negative amortization mortgages being promised a solid, appreciating market by confident mortgage companies. Now we are seeing the fallout of that scam with a new type of mortgage scam–a foreclosure scam. Continuing on my topic from the other day, we are seeing more and more evidence of yet another type of mortgage scam–lending servicers baiting mortgage holders with hopes of a permanent mortgage modification only to have their homes foreclosed on. This article lays out the situation cleanly. What kind of reform do you think we need to curtail all these straw mortgage houses & their foreclosure scams? Thanks for stopping in.
Did lenders rig the market against homebuyers?
Local real estate consultant says lenders profit from foreclosing
As a local commentator on the housing industry, George Mantor has often been known by the moniker “The Real Estate Professor” when he doles out advice about the forces that impact the real estate market.
At various times in the past 30 years, he has held monthly real-estate workshops, headed training at Great Western Mortgage, written columns for a wide variety of real estate media, hosted his own show on KCEO radio and been a frequent guest on the Fox Business Network, expounding upon such topics as home sales and resales, real estate investments, commercial property and resort marketing. He even served a term as a director of the California Association of Realtors.
But these days, one of Mantor’s chief focuses has been on home foreclosures and the mortgage crisis. In 2007, he began fielding complaints from homeowners who told him that the servicers of their loans – the companies that lenders hire to collect and distribute payments on the loans – seemed as if they were trying to force them into default and foreclosure.
What he discovered, he says, is that “there are thousands of examples of foreclosures on wrong addresses, wrong parties, homes without loans, homes in a modification program, and the homes of people who never missed a payment.”
Many of the foreclosures happened as the borrowers were moving through the process of getting their mortgages modified.
Citing rules approved by the federal government, lenders told borrowers that their loans could not be modified unless they went into default. After the borrowers defaulted, they applied to get their loans modified, but many complain that the procedure – which was supposed to last only one or two months – was dragged out to as long as a year as the lenders told repeatedly told them that they had lost their applications and they had to resubmit documents in order to get the modifications approved.
During this time, the homeowners’ debts continued to build until finally the lender foreclosed.
“Who is in a better position to exploit a defaulting borrower than a person posing as someone who wants to help?” Mantor asked. “All the moves are choreographed to stymie, befuddle, and eventually beat down the homeowner until they give up in despair.”
Mantor said the lenders use “a variety of tricks” to foreclose on homes.
“They will insist that they did not receive your payment, even though they did,” he said. “They will say that the homeowner is without adequate insurance. They will claim they paid your property taxes, even though they cannot prove it.”
As an example, he cited the case of Michelle Norris of Temecula who recently lost her home after the servicer alleged that it had been paying her property taxes.
Norris said she had paid the property taxes and had the receipts to prove it. But even though the loan servicer allegedly told her it had all been a mistake and it would soon be resolved, her home was foreclosed upon.
Although he once worked for a lender – in charge of training and customer service for the real estate division of the now-defunct Great Western Bank – he became very critical of the way banks have handled the crisis.
“What I didn’t understand at that time (when he first heard complaints from borrowers) was the real reason behind the servicer’s actions,” he said. “The servicers make way more money by foreclosing then they do by modifying the loan. And the lenders actually bought a form of insurance – credit default swaps – worth multiple times the loan amount. If they did not force the borrower into default, they couldn’t collect the money on the default swaps.”
Mantor became so incensed by the growing number of foreclosures that he launched the American Foreclosure Resistance Movement, a group that challenges foreclosures, and he is working as a consultant to attorneys who are helping homeowners deal with the lenders.
Following are some of his views on the rising foreclosures.
Question: Nearly four years into the real estate crisis, homes are still being foreclosed on at a historically high rate. How long will this last and how bad will it get?
A. At this point I’d be very wary of anyone who professes to know an answer to that, although in my opinion it will only get worse over the next two to three years.
To read more Q & A click here…..
- Strategic Defaults Revisited: This Could Get Very Ugly (businessinsider.com)
- “Homeowners in Danger of Foreclosure Are Most Vulnerable to Con Artists and Financial Scams, Warns Oyezz Real Estate” and related posts (americanconsumernews.com)
- 10 Types of Companies Involved with Foreclosures (doorfly.com)