California Agencies Warn Consumers About Mortgage Fraud

As 2012 begins, the California Department of Real Estate is still warning consumers to be wary of promises for loan modification, mortgage relief and foreclosure rescue scams as fraudsters to continue prey on vulnerable, financially stressed homeowners.

The DRE, whose mission is to protect the public interests in real estate matters, continues to file several cases against individuals and entities that are illegally offering loan modification and mortgage relief services.

With the economy still struggling, tactics that con artists and third-party operators are using to prey upon homeowners includes promising reduced monthly mortgage payments in exchange for an upfront fee. However, this tactic is illegal and once the fee is paid, the scammers do little or nothing is done to obtain the loan modification on behalf of the homeowner.

“It is imperative that law enforcement and administrative agencies work together to ensure consumers get the protection they deserve in these tough economic times,” said Barbara Bigby, the acting real estate commissioner for the California Department of Real Estate.

Since 2009 over 1,100 administrative actions have been filed in the DREs database for modification scams. According to the DRE, the most common scam involves the issuance of a desist-and-refrain order to an unscrupulous operator to stop their illegal activities.

The California Association of Realtors echoes the sentiments that the DRE has faced regarding consumer awareness about these fraudulent scams.

“Every week, we hear reports of unscrupulous con artists who have taken advantage of unknowing, financially troubled homeowners,” said LeFrancis Arnold, president of the California Association of Realtors.

CAR said there's no need for individuals to utilize third-party operators because they may not improve a homeowner's chances of payment modification. Furthermore, the agency said that certain advice provided by these third parties, like stopping mortgage payments, could be extremely detrimental to working with the homeowner's mortgage servicer.

According to the Federal Trade Commission, these third-party scammers review foreclosure notices in newspapers, the Internet and public files to identify potential victims. Ads scammers place online, on television and in newspapers that claim to “stop foreclosure now” and offer “money back guarantees” are suspect and should be reviewed cautiously by the homeowner, CAR said.