Sunday October 10, 1999
Payment scam targets owners
WASHINGTON - At any given moment, nearly a million owners are so for behind in their house payments that they face losing their homes to foreclosure. But too many of them end up forfeiting much more than the roofs over their heads.
Lured by con men who advertise themselves as "mortgage consultants" and "foreclosure specialists," unsuspecting owners who are so desperate they try anything to save their homes often also lose thousands of dollars in fees and misdirected house payments.
The California-based Bankruptcy Foreclosure Task Force has identified a nurnber of foreclosure scams, all designed to take advantage of what it says is 'one of the most powerful injunctions available under American law- the automatic stay."
Under the federal Bankruptcy Code, the Ming of a bankruptcy petition automatically stops all actions or proceedings to enforce a claim against the debtor or the debtor's property. WIthout actually having to prove that you are entitled to the stay, simply filing the necessary papers halts all collection actions, suspend tires and terminates pends foreclosures
It bankruptcy case of-
A completed ten buy financially distressed home owners
the time they need to cure buy financilal arTearages with a newpaymentplan under. Chapter 13, or eliminates the loan entirely under the "fivsh sWV provisions of Chapter 7. But many cases are filed by people who have no intention to complete them, the task force found. continued from h-1 H-1
In some instances, petitions are filed by the owners themselves in filed faith who, for one reason or another, fail to take further action. But increasingly they are being filed
ply as a stalling tactic. And more en than not, they are filed on the
owner's behalf, sometimes without the owner's knowledge, by oppor- who know that once a foreosure trustee learns that a bank
nuptcy petition has been filed, the sale will be delayed until relief from the stay is granted by the court. "Some people have apparently created whole businesses out of the lay possibilities provided by the
automatic stay," the task force found
While the panel's study described the most popular bankruptcy fore- scams operating in the cen-
California region, they are by no means limited to the West Coast. According to Jane Limprecht of the United States Trustees Pro
gram, component of the Justice
co Department that supervises the ad- of bankruptcy cases na- tionwide, this kind of fraud is "geo-
graphically graphically widespread."
Indeed, says Limprecht, who de-
Oiled the abuses in an article last uear in the ABI Journal a publica- of the American Bankruptcy Institute "mom-and- pop" operators
are now active even in mid-size NfidAestem cities. And some swindlers are becoming so bold as to seek re- affiliations with local consurnbankruptcy attorneys.
,Perhaps the most popular ruse in-
Mes the use of foreclosure notices dentify owners facing the loss of tb*homes. QUM identified, the Perpetrator contacts the owner, of-
"mortgage assistance" or closure counseling" and promIdng to work out the owner's probwith his lender for an up-front ally ranging from $250 to I The owner is directed to fill out a few forms including a blank bank- After completing the the con artist files the peti-
owner's name. Ile peti- the automatic stay, foreclosure postponed and the
stops
and letters.
Losing your house
doesnt even ell the owner about petition. Instead, he convinces
the owner that foreclosure activity because the owner's problems have-been worked though, when no one appears. hearing before a trustee to op- the stay, the case is dis- foreclosure proceeds the house is lost en however, the case has delayed for months, and dur- time, the crook has been monthly mortgage payunknowing owner, who has been told the payments will forwaredd to the lender. another popular swindle, law enforcement officials call the frac- transfer," a 5 percent percent interest in the proper
sferred to a real or fake enti- ady in bankruptcy and for -an alltDnudc stay had
a already filed. Since the lendefcannot lose when even a portion of the rship is held by somq)ne proby a stay, the processing is in its tracks. metimes the transfer is done the financially troubled owner's But often, it is transferred swindler, who then transfers to someone else without eggs knowled
get And somethe interest is'moved from case as each stay is lifted. force found one property
Wt'~W linked to 24 different bank- 7 cases. In another case, the
rr paid
a not only the up-front fee
64also several hundred dollars a to stay in her home. a obvious victims in all this are who, the task force found, no payments for many a, or even years, while being from foreclosing." But it Koppers lose big, too, and notjust
I 4;ii homes or money.
C Once abankruptcy has been filed
name, the court has no au- to remove it from future reports, even if itisWAsuna*- And of course, onci-&se. V f phony filings is under way, mobility of renegotiating the has been destroyed. Renters are victimized, too. Often, will break into an empty or take control of a home a defaulting owner who has out The house is then to someone who is led to bethey are dealing with the ownhis authorized agent Tenants security deposits able to recover, and unlease-purchase scams, cant improvements be- are unceremoniously evict Foreclosure scams are difficult to detect because the cases are usually dismissed for failure to participate, leaving no sign of the defrauded homeowner, says Limprecht Many owners never realize they've been had. But when a victim complains to the scam artist, if he can be found, after a foreclosure occurs, he's told his problems were just too serious to work out
Scams like these are most likely to flourish in judicial districts flooded with bankruptcy filings. But it just takes a little common sense to avoid them. Simply beware of ads or flyers which promise to make your difficulties disappear.
"Attention Home Owner. Save Your Home - Stop Foreclosure Novi" and "Well help you keep your piece of America" are typical of the come-ons, some of which may play up their ethnic or religious connections; with names such as "Chris, tians Helping Homeowners."
And remember. If it sounds too good to be true, it probably. is.
Ile proper way to avoid foreclosure is to contact your lender at the first sign of trouble.
"People who have reached a desperate state often become easy prey for financial predators," says Lynne Strang of the American Financial Services Association.
AFSA also suggests that if you need outside help, seek it from a respected housing counseling agency listed with the Department of Housing and Urban Developments housmg-counseling clearinghouse.
You can call them at (800) 569-4287 or visit their Web site at http://www.hudhcc.org .
And finally, if you think you've been scammed or have been ap- proached by a crook, contact the U.S. trustee or U.S. attorney in your area or the local HUD Inspector General's Office.
Low sichetman is a nationally syndicated columnist based in Washington. -