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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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US Loan Scams - without consumer protection can we expect similar scams in Australia?

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US LOAN MODIFICATION SCAM ALERT

This story, from the US, shows how scammers exploit the unwary - in this case, struggling borrowers who may have "bad loans". 

There are other stories on this site - worth reading. 

Watch out for variations on these kinds of scams down under as well as the Loan Fraud issue gains momentum. 

http://www.loanscamalert.org/

 

6 THINGS YOU SHOULD KNOW

Scams aren't always easy to spot – but it helps if you know the warning signs to look for. Here are six red flags to indicate that you may be dealing with a loan modification scammer:

1

A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage. They may pocket your money and do little or nothing to help you save your home from foreclosure.

2

A company/person guarantees they can stop a foreclosure or get your loan modified. Nobody can make this guarantee to stop foreclosure or modify your loan. Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.

3

A company/person advises you to stop paying your mortgage company and pay them instead.Despite what a scammer will tell you, you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, contact your mortgage lender.

4

A company pressures you to sign over the deed to your home or sign any paperwork that you haven't had a chance to read, and you don't fully understand. A legitimate housing counselor would never pressure you to sign a document before you had a chance to read and understand it.

5

A company claims to offer "government-approved" or "official government" loan modifications. They may be scam artists posing as legitimate organizations approved by, or affiliated with, the government. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure. And, remember, you do not have to pay to benefit from government-backed loan modification programs.

6

A company/person you don’t know asks you to release personal financial information online or over the phone. You should only give this type of information to companies that you know and trust, like your mortgage lender or a HUD-approved counseling agency.

 

JOSE'S STORY

Loan scammers target more than just homeowners struggling to pay their mortgage. California homeowner Jose Chirino knows that first hand. In November 2010, he received a call from New Century Solutions with an offer to do a forensic audit on his mortgage although he was current. New Century promised they could get Mr. Chirino’s lender to reduce his mortgage by hundreds of dollars. They claimed his mortgage contract was probably bad based on their experience with his lender. They also said once the errors were “uncovered” during the forensic audit, they could demand that the bank reduce his mortgage. Mr. Chirino thought the promise to get his mortgage reduced because of errors in his contract was an offer too good to refuse. He decided to let New Century Solutions conduct a forensic audit on his mortgage.

Mr. Chirino was told the New Century lawyers would work on his file. After that, he would receive information from his lender in about one month. The cost for the audit was $2,000, which he could do in easy installments. He paid the first installment of $1,000 to start the forensic audit process. He was told they found some errors on the mortgage contract. Next he paid the second installment of $500 to continue the audit. A month passed and he still hadn’t heard anything about the audit results. He called to check on the status but no one returned his calls. Something was wrong.

Mr. Chirino called his lender about the forensic audit status. To his surprise, New Century had never called the lender. In fact, his lender knew nothing about the forensic audit or any negotiations to reduce his mortgage. After talking to the lender, he made repeated calls to New Century but nothing happened. He paid $1500 and did not get what he was promised. He realized he was scammed and demanded that New Century refund his money. Despite his best efforts, New Century ignored his demand.

He needed help. He reached out to a local nonprofit, SurePath. They referred him to Law Foundation of Silicon Valley, an organization that could assist him reporting the scam and getting his money back. Working with the Fair Housing Law Project, a program of the Law Foundation of Silicon Valley, Mr. Chirino submitted a demand letter that detailed his claims. After repeated communications, New Century Solutions finally issued a full refund to him in July 2011. Now Mr. Chirino wants to make sure other homeowners do not get scammed.

 

COMMON SCAMS - HOW TO SPOT THEM

Loan modifications are changing every day. Here are some of the most common loan modification scams out there today.

Phony Counseling or Foreclosure Rescue Scams 
The scam artist poses as a counselor and tells you he can negotiate a deal with your lender to modify your loan or save your house—if you pay him a fee first. The fee may be called a processing fee or administrative fee. He may even tell you not to contact your lender, lawyer or housing counselor—that he'll handle all details. He may even insist that you make all mortgage payments directly to him while he negotiates with the lender. Once you pay the fee, or a few mortgage payments, the scammer disappears with your money.

Fake "Government" Modification Programs
Some scammers may claim to be affiliated with, or approved by, the government, or they may ask you to pay high, up-front fees to "qualify" for government mortgage modification programs. The scammer's company name and Website may sound like a real government agency, but the Website may end with .com or .net instead of .gov. You may also see terms like "federal," "HAMP," "MHA," "HARP" or other words related to official U.S. government programs.

Contact your lender first. Your lender will be able to tell you if you qualify for any government programs to prevent foreclosure or modify your loans. And you do not have to pay to benefit from these programs.

Forensic Loan Audit
The scammer who may be called a forensic or mortgage loan “auditor” offers to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The scammer will usually require that you pay a fee to start the process. The scammer may say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

There is no proof that a forensic loan audit can save your home from foreclosure although it's conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer. Even if you sue your lender and win, your lender is not required to modify your loan to make it more affordable. If you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

Mass Joinder Lawsuit
The scam artist, usually a lawyer, law firm or a marketing partner, will promise that they can force your lender to modify your loan. They will tell you that by joining other homeowners in a mass joinder lawsuit against a particular lender, you will be able to stop a foreclosure, reduce your loan balance or interest rate, receive monetary damages, or even receive title to your house free and clear. Mass joinder lawsuits can be used legitimately; these lawyers are usually paid *after* the lawsuit is over, on a contingency basis. However, mass joinder lawsuit scammers will try to "sell" you participation in a lawsuit against your mortgage lender, claiming that you cannot participate in the lawsuit until you pay some type of fee.

Bait-and-Switch
The scam artist convinces you to sign documents for a "new loan modification" that will make your existing mortgage current. This is a trick. You actually just signed documents that surrender the title or deed of your house to the scam artist in exchange for a "rescue" loan. Thoroughly read any document before you sign it.

Rent-to-Own or Leaseback Scheme
A scammer urges you to surrender the title or deed of your home as part of a deal that will let you stay in your home as a renter and then buy it back in a few years. He may tell you that surrendering the title will permit a borrower with a better credit rating to get new financing—and keep you from losing your home. However, the scammer may have no intention of ever selling the home back to you.

But the terms of these deals usually make buying back your home impossible. Worse yet, when the new borrower defaults on the loan, you're evicted.

Variations:

1

The scammer raises your rent over time to the point that you can’t afford it. After missing several rent payments, you are evicted, leaving the "rescuer" free to sell your house.

2

The scammer offers to find a buyer for your home, but only if you sign over the deed and move out. The scammer promises to pay you some of the profit when the home sells. But the scammer simply rents out your home and keeps the profits while your lender proceeds with the foreclosure. You lose your home and are still responsible for the unpaid mortgage, because transferring the deed does not affect your mortgage obligation.

Short Sale Scam
Scammers, sometimes called "short sale negotiators" or "short sale processors," may promise to expedite a short sale and usually require you to pay a fee, which is illegal in many states. Some scammers may even include surcharges or hidden fees before the transaction closes, which are also illegal in many states. The scammer may also misrepresent the value of the home to the lender.

A short sale may be a legitimate option for a homeowner in default or homeowner who is current yet the value of the home has fallen -- if the lender agrees to the short sale. But homeowners should only work with a licensed real estate professional or licensed real estate attorney since the law requires that the person be properly licensed to negotiate the short sale with your lender. Homeowners should verify licenses with their state licensing agencies.

Bankruptcy to Avoid Foreclosure
The scammer may promise to negotiate with your lender or get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, he pockets the fee and files a bankruptcy case in your name—sometimes without your knowledge.

A bankruptcy filing often stops a home foreclosure, but only temporarily. Filing bankruptcy stops any collection and foreclosure while the bankruptcy court administers the case. But, eventually you must start paying your mortgage, or the lender will be able to foreclose.

You could lose the money you paid to the scammer and your home. Worse yet, a bankruptcy stays on your credit report for 10 years, which makes it difficult to obtain credit, buy a home, get life insurance or even get a job.

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Guest Wednesday, 02 December 2020