Foreclosure Scams - Feds Hot On The Trail Of Foreclosure Scams

Feds Hot On The Trail Of Foreclosure Scams

February 29th, 2008

Foreclosure scams beginning in California have swept across the country. Federal Investigators are honing in on Kansas. Bogus bankruptcies have been used to cheat house owners as well as lenders. Advantage has been taken of the clause that bankruptcy automatically postpones foreclosures. Bankruptcies are now on the rise.

The danger is that when buyers think they have made a bargain actually they lose their houses when the false bankruptcies find exposure. Lenders lose thousands of dollars by way of legal fees trying to pin down these false bankruptcy filings. Whether bogus or not it has to be proved and the process is time consuming. In Kansas the department of justice is sniffing out at least nine doubtful bankruptcies filed in courts of Kansas, Topeka and Wichita.

More phony filings are surfacing in Maryland, Nevada and Texas and it is only a matter of time before it will be smelt in other states as well.

Foreclosure fraud has resulted in loss of billions. In Kansas alone there are cases involving 3 million. Most are from California – the top ranking foreclosure state. The scam started in the West Coast during the 1990’s when the real estate began to take the downturn course but now it is flowing over to the Midwest aggravated by the foreclosure crisis.

The scammers go into hiding like rats when the feds stamp around. They bide their time and once more surface when the coast is clear – multiplying like festering sores.

The methodology is to approach foreclosure victims with offers about saving their properties for one time fees or monthly payment. That apart the owners are persuaded to give the so-called helpers a legal interest in the unit. Having obtained this, without the knowledge of the original owners, they transfer fractions of the property to third parties. The latter are fictional or straw-buyers. Bankruptcy is filed against the third parties in courts that are thousands of miles away from the property in question. Many homeless people are tempted to take part in the game. The delay lines the pockets of the scammers by way of monthly fees. Because debt collectors are not coming the borrowers think that the foreclosure has stopped; others are made to understand that the monthly fees are paying off dues. Scammers often take over the property and rent it out to unsuspecting tenants who soon get evicted.