Some people unknowingly sign away ownership
April 15, 2006
Brenda Edwards, 54, and husband Terry Edwards, 56, at their home Wednesday in Royal Oak. They fell into a mortgage fraud scam in 2004 and are fighting to keep their house of 32 years. "It's made us where we can't sleep at night -- we don't trust anyone," she says.
How to avoid mortgage fraud
Get real estate or mortgage referrals from friends or family members whenever possible.
If a deal or program sounds too good to be true, it probably is.
Never sign a contract under pressure. Take time to thoroughly review all paperwork. Also, don't sign anything with blank lines or spaces.
Don't sign away ownership of your property to anyone without advice from your lawyer.
Don't pay mortgage payments to anyone other than your lender.
Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.
Source: FBI and the National Consumer Law Center
The two most popular mortgage fraud scams, step-by-step
Scam 1) Foreclosure Deal
A mortgage company promises to make the overdue mortgage payments to the lender.
In return, the homeowner transfers the property title to the company.
The owner is given a year to buy back the title, but in many cases the company ends up with the home.
The company then can resell it for a profit.
Scam 2) Equity Skimming
A homeowner needs equity from the house.
An investor may use an independent buyer, false income documents and false credit reports to obtain a mortgage loan in that buyer's name.
The homeowner is deceived into signing over the title of the home, thinking he or she can rent it and then buy it back.
Instead, the independent buyer does not make any mortgage payments and rents the property until foreclosure takes place several months later.
The buyer then gets the equity from the initial loan.
Sources: FBI and the National Consumer Law Center
Metro Detroit residents in danger of losing their homes to foreclosure, or those looking to tap equity from their houses to catch up on overdue bills, are falling prey to mortgage fraud scams that promise to rescue them from financial peril.
Instead of being helped, however, unsuspecting homeowners are tricked into believing their homes can be saved -- only to later learn that they've lost their houses for good.
Michigan has one of the most serious and fastest-growing mortgage fraud problems in the nation, according to the FBI, fueled by homeowners who can't pay their mortgages, taxes and other bills during these rocky economic times.
In turn, lenders lose billions of dollars each year when home loans fall into default, Tim Doyle, senior director in government affairs for the Mortgage Bankers Association in Washington, D.C., said Friday.
"You can call the lender and the borrower co-victims," Doyle said. "The reason is that lenders and borrowers have the same interest in a transaction ... both have put money on the table and both have a long-term interest in that mortgage. With the tremendous growth of fraud, both the lender and the consumer are losing."
Statewide, mortgage fraud losses jumped from nearly $9 million in 2003 to $26 million in 2005, according to FBI statistics. Nationally, mortgage fraud losses increased from $429 million in 2004 to $1 billion in 2005.
The FBI ranked Michigan No. 8 out of 10 so-called hot spots nationwide for mortgage schemes in its report on financial crimes published last May.
Behind the statistics are people who can't shake the feelings of being abused and victimized.
"It's made us where we can't sleep at night -- we don't trust anyone," said Brenda Edwards, 54, of Royal Oak. She and her husband, Terry, are still dealing with the repercussions of a 2004 mortgage fraud case.
"Through this whole thing I've wondered what I did wrong. I trusted them to the point where I didn't ask questions," she said of the people involved in the fraud. "Now we're fighting to keep our home. It's not fair."
The Edwards' are an example of people who unwittingly fall for a popular form of mortgage fraud, where the homeowners -- seeking financial help through the equity in their homes -- are deceived into signing over the title.
Industry officials -- appraisers, assessors and lenders -- are holding fraud workshops nearly every month to help battle the problem. In addition, they've teamed up with law enforcement to call for better lending regulations and oversight.
Though mortgage companies need to be licensed in Michigan, the loan officers who work in them do not, said Ralph Roberts, a real estate company owner, fraud fighter and best-selling author based in Warren.
Roberts has been working with state legislators to encourage licensing and state-to-state uniform requirements.
"Every state needs to do it and share the data," Roberts said. "A crooked loan officer could leave Utah, for example, and come to Michigan to do that same fraud. Having a license requirement is not gong to stop mortgage fraud, but it would at least be another piece to slow it down."
The schemes can be found anywhere -- from signs posted on utility poles to flyers in mailboxes. And fraud aftershocks are felt by all borrowers because lenders charge higher interest rates to cover losses.
"I have never seen any type of fraud ... come so fast and involve so much money," said the FBI special agent investigating the Edwards case. He asked not to be named because he sometimes works undercover.
"It's unbelievable; we can't keep up with it."
A loan and a foreclosure
The Edwards' appeared in 44th District Court in Royal Oak earlier this week in hopes of convincing a judge that they were bilked and should not be evicted.
They have lived in their Royal Oak bungalow for 32 years, and they paid it off in 1997. In February 2004, the couple fell behind on property taxes after financial problems related to a car accident, and they planned to take $10,000 in equity out of their home.
From the phone book, they randomly chose a mortgage company but were told it didn't handle loans that small. A loan officer referred them to a personal lender with the now-defunct Hispanic Financial Group of Southfield. Phone numbers for the company and its owner, the personal lender, are disconnected.
The personal lender, who the Free Press is not naming because he has not been charged, is under federal investigation in at least three other cases of mortgage fraud in the area, according to the FBI.
He cut the Edwards a check to Oakland County to cover the $9,128 in delinquent taxes just before the March 2004 due date.
In April 2004, the couple were told they needed to go to a title company to finalize the loan.
They said they signed lots of papers, including a warranty deed through which they unknowingly gave their property to someone else.
The Edwards', who said they thought they merely had a $10,000 loan to pay back, found out a year later that the person they unknowingly signed their home over to obtained a larger mortgage on the house and then defaulted on the loan.
The house went into foreclosure and was sold to U.S. Bank National Association, which is now trying to evict the Edwards'. Royal Oak Judge Terrence Brennan is scheduled to hear arguments May 24.
More federal help sought
To fight the problem, the Mortgage Bankers Association announced plans in January to seek $7 million in federal funding to hire 30 new FBI field investigators and two Department of Justice prosecutors to investigate and coordinate real estate fraud cases.
Doyle said the association has sent letters to the U.S. House and Senate appropriations committees to state its case.
"We're still very actively engaged in that issue," he said. "We're hopeful that Congress recognizes the problem to the same extent we do, and is willing to commit funds to specifically authorize the FBI and Department of Justice to increase its staff to fight mortgage fraud."
In addition, the association is holding its first fraud issues conference in Chicago next month. The sold-out conference is expected to bring together more than 300 people, a cross section of the real estate industry, along with state and federal regulators and law enforcement officials, to discuss new initiatives and identify emerging trends.
"Our members have indicated to us that the issue of mortgage fraud toward lenders and homeowners has been an increasing problem and costly to their operations," Doyle said. "We could have very easily doubled the number of attendees to the conference, had we had the space to do it."
Contact SUZETTE HACKNEY at 313-222-6614 or firstname.lastname@example.org.
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