Separating the wheat from the chaff: legitimate foreclosure investors vs. scammers
An article in the Los Angeles Times on
Tuesday documented the sad story of a defaulted homeowner who was the
victim of alleged foreclosure fraud. The homeowner said he was tricked
into signing over the title of his home by a scam artist who did
nothing to stop the foreclosure and then took out another loan against
the property with no intention of paying it off. The article goes on to
make the case that foreclosure fraud crime is on the rise.
It is a crime that
consumer advocates fear could become increasingly common — especially
in Southern California, where many homeowners have stretched themselves
to their financial limits to afford the region's record high housing
prices.
"The scammers don't
create the foreclosure rates, but they swoop in at the time that
someone is in distress," said Elizabeth Renuart, a staff attorney with
the National Consumer Law Center in Boston and the author of "Dreams
Foreclosed: The Rampant Theft of Americans' Homes Through
Equity-Stripping Foreclosure 'Rescue' Scams."
While still
considered low, indications are that the nation's foreclosure rate is
on the rise, meaning the pool of potential victims is growing. Overall,
the foreclosure rate in the Los Angeles region has doubled since
October, according to RealtyTrac Inc., an Irvine-based company that
monitors foreclosures. As of February, the rate was one foreclosure for
every 1,223 households.
At the same time, the
steep rise in housing prices over the last few years has created a
massive amount of equity in many properties — a tempting target for
swindlers.
The Milwaukee Journal Sentinel posted a similar article last month.
It’s not clear from
these articles whether the apparent rise in foreclosure-related fraud
is the result of a few bad apples, widespread scams or just more
vigilance on the part of the media and homeowner advocate groups such
as the ones quoted. In any case, legitimate foreclosure investors will
need to find ways to overcome the stigma associated with foreclosure
investing because of the increased attention to this problem. In the
end, the increased attention benefits both homeowners in default and
legitimate foreclosure investors, but it may take some time and effort
to separate the wheat from the chaff.
Any thoughts on how legitimate foreclosure investors can differentiate themselves from scammers? Make a comment or send us an e-mail.