As Mortgage Loan Market Turns Tight, a New Scheme Emerges

With the housing market in decline, predators are finding yet another way to take advantage of people who fall behind on mortgage payments.

The mortgage scams take various forms and often involve a promise to help distressed owners with cash upfront, free monthly rent, and a chance to retain their houses in the long run.

But in the process, someone else takes over the deed, borrows as much as possible against the value of the house, and pockets the cash.

There are no nationwide numbers on this common style of mortgage fraud, known as equity stripping, but it has turned up in almost every state.

Seven states have passed laws to stop it. Still, with the foreclosure rates rising rapidly, it will continue to be a growing problem, consumer advocates say.

When a home loan enters foreclosure, the property appears on a list at the county clerk’s office. Individuals and companies in equity-stripping schemes monitor the lists closely, contacting troubled owners either by phone, by mail or by knocking on their doors.

Sam Finkelstein is an organizer at the National Training and Information Center, a nonprofit that supports housing groups around the country.

His goal is to increase awareness of these home mortgage schemes and to make sure distressed homeowners find the best way out, not the easiest.

He has encountered several variations of mortgage foreclosure rescue schemes.

One program offered by RYM Technology Holdings, based in Birmingham, Mich., lured at least 20 local homeowners struggling with foreclosure and as many as 40 other people in Chicago, Finkelstein said.

SOURCE: Boston Globe