Florida To Prosecute ‘Rescue Foreclosure’ Mortgage Scams

TALLAHASSEE, Fla. – Jan. 23, 2008 –Attorney General Bill McCollum today announced a multi-pronged initiative to combat mortgage-related fraud, specifically fraud involving “rescue foreclosure” scams. As part of the litigation and legislation-based initiative, McCollum filed a lawsuit asserting South Florida-based National Foreclosure Management and multiple affiliates defrauded at least 80 homeowners out of approximately $1.7 million in home equity.

Sen. Mike Fasano (R-New Port Richey) and Rep. Clay Ford (R-Pensacola) also unveiled new legislative proposals yesterday to crack down on mortgage rescue scams.

Beginning in October 2004, National Foreclosure Management – which now does business as American Home Rescue Inc. – selected homeowners who had substantial equity in their homes but were in the foreclosure process. According to the lawsuit, the company would offer to hold the titles to the homes for a year, refinance the debt, and provide cash and credit repair counseling to the homeowner, all while allowing the homeowner to remain in the house. The company claimed it would deed the property back at the end of the year after the foreclosure had been avoided and the homeowner’s credit repaired.

Once the company had obtained the title to the house, the lawsuit alleges that the company would strip the equity from the homes by refinancing them at inflated prices and by assessing fraudulent fees and costs, leaving little or nothing for the homeowner to recoup. The home would then be sold outright to an investor or a straw buyer who would lease the home back to the homeowner at a rental rate far exceeding the original mortgage payment, virtually ensuring the homeowner’s eventual eviction. According to the lawsuit, the homeowners would end up with neither the titles to the homes nor the equity that rightfully belonged to them.

The lawsuit, filed with the Office of Financial Regulation, seeks restitution to the affected homeowners, dissolution of the rescue foreclosure companies, and revocation of the mortgage brokers’ licenses.

“Mortgage fraud is a destructive crime that can destroy a family’s future in an instant, and we need stronger laws to protect Florida’s consumers,” said Chief Financial Officer Alex Sink, who oversees the Department of Financial Services and who heralded today’s actions as essential to the fight against mortgage-related fraud. “It is downright disgraceful that some would use trickery to steal the dream of homeownership from a struggling Floridian.”

The proposed legislation – SB 992 and HB 643 – offers the following provisions:

• A five-day right of cancellation period that allows a consumer to cancel the agreement with the foreclosure rescuer

• Requires that foreclosure rescuers include in the contract clear and conspicuous notice to homeowners of this right of cancellation, as well as a recommendation that the homeowner contact the lender or mortgage servicer prior to the signing of the agreement, and a provision that states the consultant is prohibited from accepting any form of payment until all services are completed

• Defines terms such as “Equity Purchaser,” “Foreclosure Consultant,” “Foreclosure-related Services” and “Foreclosure Rescue Transaction”

• Creates penalties, defining violations as unfair and deceptive trade practices subject to the penalties included in Part II of Chapter 501, Florida Statutes.

© 2008 FLORIDA ASSOCIATION OF REALTORS®
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Cash Back Scheme Gets Agent Convicted

By: Javier Gines

Last week I ran across this story about a real estate licensee and 6 other defendants getting convicted by a federal jury on fraudulent charges against them. Apparently, Mr. Brandon L Baum, a licensed real estate agent would offer his clients substantial cash back at closing under the guise of repair costs that they would be able to use for their personal benefit as long as they agreed to purchase the property at an inflated price.

Mr. Baum was working closely with a mortgage broker who would facilitate the submission of fraudulent loan applications for the potential homeowners that could not qualify for the loans. False information would be provided on the loan applications. In some cases, Mr. Baum and his team would provide temporary loans to buyers for down payments with the understanding they would be reimbursed at closing from the purported remodeling or repair costs, marketing services fees and other undisclosed disbursements. The buyers in those cases would falsely represent the sources of the down payments.

Mr. Baum would present the sales contracts to the seller’s agents at prices far above those listed on the MLS. The seller’s agents would then present the contracts to the sellers by which the sellers would agree to pay for the purported remodeling, repair and other charges. Once the purchase terms had been approved by buyer and seller, the seller’s agents would, in many cases, increase the MLS list price to an amount equal to or above the agreed inflated purchase price to avoid detection by the lenders. At closing, the title companies were directed by Baum, sellers’ agents and the sellers to issue checks from the sales proceeds to various entities for purported remodeling, repair costs, marketing service fees or other fees.

Now as I am reading all of this, I notice something very interesting. 3 out of the 7 indicted were buyers.

It is extremely important to be careful with the representation you select. As we get by this difficult period in which the housing market is going through, there will be unscrupulous real estate professionals who will be willing to commit fraud or get you involved in an unlawful transaction in order to get a deal.

This event took place in Oklahoma and I don’t know what kind of resources their particular county offers to individuals who have a hard time qualifying for a home loan. I do know that in Central Florida there are numerous programs that could help people get their financials in order, assist on a down payment and get them into a property. There is no need to get involved in a situation like this. In reality, it’s not worth it either.

Remember! Good representation will get you far ahead in a transaction. In this case, maybe out of Jail!


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