LANSING- In the minds of home foreclosure scam artists, desperate times call for fraudulent measures.
With Michigan ranking eighth in the country in foreclosures, anxious homeowners who feel short on options are ripe for the picking by opportunistic scammers.
According to a RealyTrac.com report, one in every 122 properties in the state received foreclosure filings in the third quarter of 2009.
Banks repossessed 14,997 homes, owners of 11,454 properties received default notices and owners of 10,575 properties were sent notices of sale.
In total, the state had 37,026 foreclosure filings during the period, the report said.
Homeowners in danger of foreclosure should tread carefully if they receive unsolicited mailings from companies claiming they can save their homes, said Jason Moon, public information officer with the Office of Financial and Insurance Regulation (OFIR).
“Scam artists are trying to take advantage of people in desperate times,” Moon said. “If it seems too good to be true, it probably is. We encourage consumers to get their guard up.”
A scam artist begins the courting process by sending a letter to an at-risk homeowner offering to negotiate with a lender or handle payments for a fee.
If the owner responds and pays the fee, the fraudster may then ask the owner to sign over the deed while staying there as a renter.
Moon said schemers give owners false hope by telling them their houses will be sold back to them once the situation is rectified.
Instead, scammers obtain a new mortgage at a higher rate and cash in on the home’s equity.
They then disappear without making mortgage payments or even calling the mortgage company or bank.
Meantime, homeowners think everything is under control until they discover that no payments have been made, Moon said.
“In some cases, the company never existed. You pay money for a service that is never performed,” Moon said.
OFIR receives about 500 calls a year regarding foreclosure fraud.
The money homeowners pay fraudsters could help pay for transitional housing, said Lisa Nuszkowski, co-director of the Michigan Foreclosure Task Force.
“All kinds of companies have sprouted up,” Nuszkowski said. “It’s the worst kind of fraud. It’s a tragedy.”
The Foreclosure Task Force is a statewide collaboration of legal services attorneys, financial institutions and foreclosure prevention counselors that educates homeowners and assists families in danger of losing their homes.
Victims of fraud may end up turning to nonprofit organizations such as the Lighthouse of Oakland County for help.
Greg Sterns, the organization’s manager of financial education and counseling, said nearly 1,900 people attended its foreclosure seminars or took part in one-on-one counseling services in the past year.
Before this year, most clients sought help because they couldn’t afford the rising interest rates of their mortgage.
Nowadays, job losses are forcing people out of their homes, Sterns said.
The seminars include presentations to around 20 to 25 families about available options.
In one-on-one sessions, counselors help people reassess their budgets while planning their next moves.
A successful case isn’t always defined by whether a person keeps his or her home.
Sometimes, helping people “make the transition” to new housing is the best result, Sterns said.
The organization helped 282 county residents keep their homes last year.
“I think it’s extremely effective,” Sterns said. “It’s a very intensive process.”
Tom Lenard, communications director of the Senate Democratic Caucus, said the party has prepared legislation to halt “foreclosure consultant” scams.
The bills would “establish basic qualifications and regulations,” for mortgage companies and “require companies to notify homeowners when a lender sells their mortgage to a third party.”
Lenders also will have to post their foreclosure and loan modification criteria online.
Those struggling with stressful foreclosure proceedings shouldn’t have to worry about someone trying to take advantage of them, Lenard said.