Stop me if you've heard this one before: Borrower needs help. Borrower goes to foreclosure-rescue business to get help. Borrower signs documents to get or start the process of getting the mortgage refinanced, only to discover later that the foreclosure-rescue specialists were really getting the home signed over to them.

Such fraud has happened across the country, both before and after the housing market went downhill. One local case just wrapped up in Baltimore City Circuit Court with a judgment ordering the defendants to pay just over $1 million in restitution and penalties.

The business associates, Michael K. Lewis, brother Earnest Lewis, Cheryl Brooke and Winston Thomas, pleaded guilty earlier in the year to criminal charges related to dozens of foreclosure-rescue scams. Michael Lewis was sentenced to 6 1/2 years in prison, Earnest Lewis to 4 1/2 years, Brooke to almost four years and Thomas to just over three years.

The Baltimore civil case, brought by the Consumer Protection Division of the Maryland Attorney General's Office, covered 13 properties, most in the Baltimore area. Once the homeowners unwittingly signed over their properties, Earnest Lewis pulled all their equity out with a new loan and split the money with the defendants, said Bill Gruhn, chief of the Consumer Protection Division.

"Some of the homeowners have moved," he said. "Other homeowners are in their homes and we were able to facilitate settlements" with the lenders.

Continue reading "Homeowner beware" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (1)
Categories: Mortgage fraud, The foreclosure mess
        

Here's what the federal agency says about "Operation Loan Lies":

The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises.

Here's the full list (link opens a PDF), which includes the firms and players that Maryland went after. Several are run by attorneys.

The state Department of Labor, Licensing and Regulation offers suggestions for avoiding foreclosure-help scams, including this one: "Beware of any person or organization asking you to pay up-front fees in exchange for providing mortgage counseling services or modification of a delinquent loan."

Remember, HUD-approved nonprofits have counselors who help borrowers navigate their lenders' loan-modification process, and they do foreclosure-prevention work free of charge. Here's the list of Maryland housing counseling groups.

Posted by Jamie Smith Hopkins at 6:30 AM | Permalink | Comments (16)
Categories: Foreclosure help, Mortgage fraud, The foreclosure mess
        

Nope. Mortgage fraudsters will always find a way.

That's the lesson of the Federal Bureau of Investigation's newest Mortgage Fraud Report, which notes that the crime "continued to be an escalating problem in the United States during 2008." The FBI lists Maryland as one of the "top 10 mortgage fraud states" last year.

The problem ranges from people fudging numbers so they can buy a home -- the "crime? what crime?" folks -- to sophisticated thieves using faked documents to grab loan money and run.

The FBI warns that FHA loans, used to devastating effect in Baltimore flipping scams about 10 years ago, offer opportunities for today's crooks. And the housing slump is hardly a deterrent:

Multiple fraud schemes are being conducted by industry professionals who are in a position to exploit the current depressed housing market. Market conditions are also fueling the use of traditional and emerging schemes which have the potential to multiply across jurisdictions as foreclosures increase, the market contracts, access to credit diminishes, and more homeowners are unable to sell or refinance their homes. Properties affected by these schemes negatively impact neighborhoods; federally insured loan programs; the mortgage, banking, and securities industries; secondary market investors; tax payers; homeowners; and the overall US economy.

Posted by Jamie Smith Hopkins at 9:28 AM | Permalink | Comments (4)
Categories: Mortgage fraud
        

Maryland ranked fifth in the country for reported mortgage fraud last year, the Mortgage Asset Research Institute said this afternoon. The report -- made to the Mortgage Bankers Association -- said fraud is worst in Rhode Island, followed by Florida, Illinois and Georgia.

Rounding out the top 10:

6. New York

7. Michigan

8. California

9. Missouri

10. Colorado

The institute bases its rankings on a state's share of U.S. mortgage fraud compared with its share of U.S. mortgages originated last year.

The most common problem is application fraud, according to the report. Fraudulent tax returns and financial statements were also high on the list.

Maryland's ranking is a big change for the state, which came in 15th in 2007, 16th in 2006 and in the high 20s the previous two years.

Fraud used to be lower than you'd expect for the number of loans processed in Maryland, the institute said. But last year, Maryland's share of U.S. mortgage fraud was 70 percent higher than its share of new mortgages.

In a press release, Mortgage Bankers Association chief John Courson said the data "shows that mortgage fraud is more prevalent today than it was at the height of the boom in mortgage loan originations." Why? The report authors blamed "desperation" and opportunity.

Posted by Jamie Smith Hopkins at 2:40 PM | Permalink | Comments (2)
Categories: Mortgage fraud