Advance fee/loan modification: Individuals guarantee that they can help homeowners save their homes by negotiating more favorable loan repayment plans with their lenders…in exchange for an upfront free. In reality, these individuals perform little or no work, might never contact the lender, and may even redirect mortgage payments to themselves. Perpetrators are often attorneys or falsely represent themselves as attorneys.
Bankruptcy fraud: Bankruptcy fraud schemes generally involve an individual requesting an upfront fee to stop foreclosure proceedings or negotiate a refinancing with the homeowner’s lender. In these schemes, the individual pockets the fees and files a bankruptcy petition in the homeowner’s name, often without the knowledge of the homeowner. In many cases, the homeowners are convinced to deed partial interests in their properties to fictitious companies or persons, and then perpetrators file fraudulent bankruptcy petitions in the name of the fictitious companies or persons to delay the foreclosure proceedings.
Debt elimination fraud: The perpetrators of these schemes—who often tell their clients they can take advantage of “loopholes in the system”—generally involve the use of specially prepared documents that are presented to the borrower’s lender to question the authenticity of their financial obligations. The documents sometimes refer to a specific government agency to help support the claims. Those operating these schemes often charge homeowners substantial upfront fees based on the total amount of the debt to be forgiven. (We’ve seen these types of schemes most often perpetrated by anti-government individuals like sovereign citizen extremists.)
Forensic audit fraud: This type of fraud usually involves an individual or company charging an upfront fee for the services of an alleged forensic auditor, mortgage loan auditor, or mortgage prevention auditor backed by forensic attorneys. These “auditors” supposedly review mortgage loan documents to determine whether the homeowner’s lender complied with state and federal mortgage lending laws. The subjects fraudulently tell homeowners they can use the audit reports to avoid foreclosure, accelerate the loan modification process, reduce principal, or even cancel their loan.
Mass joinder lawsuits: Perpetrators collect fees from distressed homeowners, ostensibly to become part of a class action lawsuit that would force their mortgage company to reduce their loan payments. Of course, no such lawsuit exists.
Short sale fraud: A legitimate short sale is a type of pre-foreclosure sale where the lender agrees to sell the property to a third party for less than the mortgage owed as a means of reducing lender losses. One of the more common forms of a fraudulent short sale scheme occurs when perpetrators convince a bank to accept a low-ball offer—usually from a straw buyer—and then subsequently sell the property to a legitimate buyer at a higher price for significant profit.