Scam artists do not look or act dastardly. In fact, they are nice friendly people who seem trustworthy. They are well dressed, look nice and are genuinely likable. This was the message that Stella Ling, senior council with the California Association of Realtors (C.A.R.) had for the audience of the REFAT Industry Outreach Foreclosure Scams Forum hosted by the Ventura County Real Estate Advisory Team (REFAT) at the River Ridge Marriott in Oxnard. Panelists included Anne Lanphar, Vice President and Associate Senior Underwriter for First American Title Company, and Miles Weiss, Ventura County Deputy District Attorney.
I attended the forum along with many other worried Ventura County real estate professionals who are concerned about real estate fraud that seems to be epidemic. Everyone was hoping to learn more on how to identify and combat the problem. Ling says any homeowner in foreclosure is under tremendous stress. The weak, elderly, and people with language barriers make prime targets for scammers. People in default have fewer resources to fight the scammers back.
The first step in the foreclosure process is the Notice of Default (NOD) and in her opinion, this is like a big billboard saying, "Come and get me scammers." Actually that was in the old days-now it's an instant email blast to the defrauders. To illustrate this point she told us the story of Martha Rodriguez who located victim homeowners through computerized databases that list homes going into foreclosure. She would promise homeowners to refinance their homes with a co-signer who had good credit to stop foreclosure and save the home. Instead of refinancing, Rodriguez and the others submitted loan applications in the names of straw buyers. These loan applications (which contained false information) let them get loans from lenders that otherwise would never have been obtainable. The loan proceeds were used to pay off the loan in default and the remaining proceeds were skimmed off by Rodriguez and her cohorts. Even though the homeowners were promised that they would keep their homes, they lost title. The straw buyers didn't make payments on the new loans and they went into default.
Other common scams Ling shared with us were offers to stop foreclosure for an upfront fee of $1,000 (or much more). These schemes often included placing a lien on property or transferring title to facilitate a refinance from a borrower with a better credit score and a promise to sell the house back to them.
Anne Lanphar, with First American Title, shared what title companies look for in trying to combat fraud. She identified the following red flags that are common elements of problem transactions:
- Escrow has no contact with seller.
- Someone signing for the seller using a Power or Attorney.
- Buyer is buying home subject to existing loan.
- Seller to remain in property.
- Repurchase options for seller.
- Usually high level of fees.
- Someone assisting borrower.
- Large payments to 3rd parties.
- Same notary on buyers loan documents and seller's grant deed.
- Seller transferring property into a trust (other than a family trust.)
- Purchase price way below market value.
It is in the best interest of Title and Escrow companies to be vigilant. The goal is to stop these kinds of scams before they get started.
(To be continued in Part II)