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Lending

Here are the most active states for mortgage fraud schemes

Loan mod scams, short sale bait-and-switches, and REO “sales”

Fraud definition
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The most active states for mortgage fraud today include California, Nevada, Arizona, Florida and Michigan, report Freddie Mac's fraud investigators.

They say one of the most active mortgage fraud schemes in these states - and across the country - lures borrowers into paying big fees to a "specialist" for a quick loan modification.

The borrower may get a bill, but no modification, when the fraudster claims to have worked with their lender or housing counselors approved by the Department of Housing & Urban Development. HUD doesn’t charge fees for loan modifications.

This bait-and-switch is not uncommon. In a prominent case in April 2014, a Michigan man was charged with multiple felony counts for defrauding more than 100 victims of $300,000 in a mortgage loan modification scam.

The twist in that case was the alleged fraudster was head of a religious non-profit, and he even defrauded his own employees, authorities charged.

The Michigan attorney general’s office alleges that Anthony Carta, 53, owner of Freedom by Faith Ministries in Detroit, took money from victims facing home foreclosures – including one of his own employees – promising to help them secure loan modifications through their lender.

The charges say Carta pocketed the money and did nothing.

Freedom by Faith Ministries never held regular faith-based gatherings but only hosted a website that advertised Carta's books and mortgage assistance program. 

In another top scheme, fraudsters add to potential taxpayer losses by arranging short sales at artificially low prices to accomplices who immediately resell them at higher prices, sometimes on the same day, to buyers the fraudsters kept hidden from the home seller and from Freddie Mac. 

Investigators also report misrepresentations by buyers of REO homes among today's most common mortgage frauds.

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