Forelosure Rescue Scams Escalate as “Piranhas” Circle

February 27, 2009

piranhaIn an eye opening report, ABC Radio Network Reporter Matt Gutman looks at the growing number of foreclosure rescue scams, targeting homeowners desperate to fight foreclosure.  The Consumer Warning Network’s Angie Moreschi is interviewed and explains the environment is ripe for people looking to take advantage and cash in on people in trouble.  Click here to listen to Gutman’s radio report, and read his story below.

Foreclosure Scams Up as ‘Piranhas’ Circle

FBI Adds Resources to Battle Mortgage Fraud Amid Exponential Rise in Complaints

By MATT GUTMAN-ABC Radio Network

MIAMI, Feb. 27, 2009 –

It was $3,500 Nickie Struthers couldn’t afford — but desperate to stave off foreclosure, the 45-year-old and her fiance, Dr. Dan Howard, a surgeon, scribbled their signatures on the check they thought would yield salvation.

She handed the check to someone she’d done business with in the past, a mortgage broker-turned-foreclosure rescuer. But months went by, and the broker seemed to disappear. He had promised to modify her loan, she said, “but he wouldn’t take our phone calls, e-mails, nothing. I never thought this would happen.”

Struthers, of Bradenton, Fla., a Tampa exurb that, like many Sun Belt communities has seen home prices soar, then sink, may be among an estimated tens of thousands of Americans apparently duped into either signing checks or signing over their homes to potential foreclosure fraudsters — though in Struthers’ and Howard’s case, the man they dealt with insisted to ABC News that he is not a scammer.

ABC News has obtained documents from the state of Florida attorney general’s office indicating an exponential rise in complaints, from nine in November 2008 to 227 this month alone. New data from the California attorney general’s office show a 26-fold increase in complaints from this time last year.

“Anytime the federal government puts federal relief funds available, we find there’s a percentage of that money that will succumb to fraud activity,” said Sharon Ormsby, the FBI’s chief financial investigator, in a telephone interview.

The FBI has set up 35 task forces in its regional offices around the country to battle mortgage fraud.

Foreclosure Scammers: ‘Piranha Circling the Kill’

But the number of Americans defrauded is soon likely to be too overwhelming for any agency to process, said Angie Moreschi of the Consumer Warning Network, a consumer watchdog group.

“You’ve got that $75 billion out there in housing aid, and that’s going to bring the scam artists out of the woodwork,” she said. “They are going to be like piranha circling the kill.”

And the pool of potential prey — families facing foreclosure — could swell to 3 million, and those underwater could be double that, according to RealtyTrac.

In some cases, said Moreschi, the shady mortgage brokers who hawked those unaffordable mortgages are the same people offering to help them modify their loans and stay afloat.

Homeowner: ‘I Trusted Him’

Struthers said she felt she was in good hands: Her broker helped her with a loan a few years ago. And Struthers, a former mortgage broker herself, felt comfortable with him.

“He wasn’t some guy off the yellow pages,” she said. “I trusted him.”

She admitted that the Bradenton McMansion she and her fiance purchased at the peak of the market in the summer of 2005 was overpriced, and that they were underfunded.

Shuffling through her papers, Struthers said her neighbor’s home recently sold for half the purchase price of their home, $817,000. Her home is now worth $465,000, she estimated, and she and Howard owe more than $800,000 on it.

She was desperate and now believes she’s been had, partly because the bank that holds her mortgage, Wachovia, told her it never heard of the man to whom she gave her money — despite what she described as bank letters he gave her indicating he was working with the bank to modify her mortgage.

She reported her experience to a private group that documents complaints about potential foreclosure swindles, which alerted ABC News of her case.

But the man who admits he accepted Struthers’ check, Chris Campbell of the company Lionstar LLP, insisted he is not a scammer. Rather, he said he believes he may have been scammed by a subcontractor to which he passed along the money, which in turn was supposed to deal with Wachovia.

He said he went into a deep depression after believing he’d lost his clients’ money, and that’s why he did not answer their calls.

But he claimed he is working to find a way to refund Struthers’ and Howard’s money.

“I think they deserve their money back and I will try to make it up to them,” Campbell said. “I’m not a con artist. I’m just a former mortgage guy. I tried to find an alternative for them. It backfired on me.”

Three Basic Scams

The FBI has identified three basic scams.

In “phantom help,” supposed mortgage rescuers make off with cash meant to rework a mortgage.

The “bailout scam” entails homeowners surrendering a house title to a con artist on the promise that they can stay on as renters and, once the mortgage fees are “fixed,” repurchase their home.

In the “bait and switch,” scammers dupe homeowners into signing what they think is a new loan but, in truth, are forged documents ceding their house to the crooks.

“It’s pandemic” said Steve Dibert, president of MFI-Miami, a firm that conducts forensic mortgage audits and fraud investigations.

Dibert estimated that up to 250,000 people have been scammed. The FBI did not confirm those numbers but noted that the numbers of scams and scam artists is booming.

According to the attorney general’s offices in states like California and Florida, the fraudsters operate all over the country. At least one firm being sued by California, First Gov, is based in Mexico, according to court papers.

To avoid being scammed, the Consumer Warning Network advises consumers to avoid paying for services up front.

The FBI’s Orsmby warns “an attorney or someone from the banking community who is willing to look over the material must be present, because the amount of money at stake, should this turn into a scam, is huge for the potential victim.”

Though hopelessly in debt, Struthers believes she’s hit a lucky streak. Wachovia, which owns her mortgage, issued a letter of default more than six months ago. Foreclosure loomed. But then, in a hearing, the bank said it had misplaced the original promissory note. And then the bank went strangely silent and the letters stopped.

“We’re hoping to stay in this house a little bit longer,” said Struthers, who, herself, is now applying for jobs in loan modification.

“Produce the Note” Buys Homeowners Time

February 26, 2009

The Consumer Warning Network’s Terry Smiljanich appeared on FOX 13 in Tampa explaining how the “Produce the Note” strategy can help buy homeowners time, as they fight foreclosure.  Watch the video clip above.

Using the “Produce the Note” strategy will force your lender or servicer to prove they have the right to foreclose on you.  If you believe you’ve been treated unfairly, you can fight back. We have created templates for a legal document request, a letter to your lender and a motion to compel to help you through the process.

Read more

Don’t Pay for “Produce the Note” Documents

February 25, 2009

house With the growing popularity of homeowners using the “Produce the Note” strategy to fight foreclosure, some rip off websites are popping up.  Beware.  Don’t fall for predator websites trying to charge you for documents that you can get here for free.  The Consumer Warning Network launched the grassroots “Produce the Note” effort as a non-profit service to educate consumers.

It’s a way for homeowners to fight back when they’re being treated unfairly by their lender or servicer.  We don’t want you to be taken advantage of by fly-by-night opportunists trying to profit off of your hardship.  Click here to find the step by step information on how to use “Produce the Note,” along with document templates that you can download for free.

The Paradox Of Savings

February 25, 2009

piggy bankBy John Newcomer:

The economy is in the toilet, unemployment is going through the roof, housing prices are plummeting, and we are in one of the worst recessions in our nation’s history. So what do the economic gurus say we are supposed to do to get us out of this mess — SPEND.

But wasn’t it the spending that got us into this mess? Yes, our savings rate went from 9% in the 1960’s to a negative .6% savings rate in 2006. In 2006, we as a nation actually spent more than we made. In simple terms, we, as a nation, were spending way beyond our means.

Now, we are scared, so people are saving again. In November 2008, we saved $229 billion dollars for a 2.9% savings rate. In December 2008, we saved $378 billion dollars for a 3.6% savings rate. January 2009 figures are due out March 2nd and are expected to show even greater savings.

This is the “Paradox of Savings.” We save when we should spend and spend when we should save. Japan went through this in the 1990’s. They saved when their economy went into a recession. Unfortunately, once their economy rebounded they continued to save. The result is their economy is still in a recession and is now getting worse.

In 1957, our economy was in recession. President Eisenhower went on television and pleaded with the American people to go out and buy a car. Yes, just like today, the automobile industry was in trouble in 1957. President Eisenhower resisted tax cuts and government spending, but pleaded for more consumer spending. Although this was the correct message, it did not work. President Kennedy, on the other hand, lowered taxes, and stepped up military and space exploration spending, and the economy recovered.  In other words, the government started spending more.

This seems counter intuitive but to pull our economy out of this tail spin, we need to look back at history and follow the advice of President Eisenhower and President Kennedy. Both the government and we, as a nation, need to spend more right now and save a little less. It seems crazy, but to avoid the “Paradox of Savings” we need to act counter intuitively.

Facebook: Are The Old Terms Really That Great?

February 25, 2009

By Jonathan Cohen:
Last week, the Consumer Warning Network reported on Facebook’s hasty retreat to its original terms of use after users raised a ruckus about recent revisions. The revisions in question would have permitted Facebook to retain and use content posted by users after they terminated their accounts. While the reinstatement of Facebook’s old terms of use has been celebrated as a grassroots victory across the blogosphere, CWN poses the question: are the old terms really so great?

A review of the old terms of use reveals that the provision that angered users over the past few weeks — Facebook’s right to use content posted by you — is very much a part of the old terms. Following is the relevant portion of the old reinstated terms of use:

“By posting User Content to any part of the Site, you automatically grant, and you represent and warrant that you have the right to grant, to the Company an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to use, copy, publicly perform, publicly display, reformat, translate, excerpt (in whole or in part) and distribute such User Content for any purpose, commercial, advertising, or otherwise, on or in connection with the Site or the promotion thereof, to prepare derivative works of, or incorporate into other works, such User Content, and to grant and authorize sublicenses of the foregoing.”

In other words, under the old reinstated terms, as long as you remain a loyal Facebook user, the social networking behemoth has the right to use your content as it pleases. So to all the artists, musicians, photographers, filmmakers, and writers out there, consider yourselves warned. If your posted work is desirable enough to warrant commercial use, Facebook might just take it and use it.

And whether you realize it or not, you gave them permission to do so when activating your Facebook account. For those of you posting family photos, don’t be surprised if that adorable picture from your little girl’s birthday party ends up in a banner ad for Facebook.

To summarize, the only significant difference between the old and recently-retracted new terms is that under the old terms, Facebook’s right to do whatever it likes with user-posted content ends when you terminate your account. As previously reported on this site, Facebook has invited users to share their thoughts and participate in the development of the new terms of use. Now if you’ll excuse me, I’m going to head over to Facebook and delete all of my posted photos except the ugly and blurry ones.

Chase Hits Cardholders with New Fee and Rates

February 25, 2009

By Jonathan Cohen:

Last month, several hundred thousand Chase cardholders were shocked by a new fee and minimum payment amount in their monthly statements. Effective immediately, J.P. Morgan Chase, one of the nation’s largest credit card issuers, is charging a $10 monthly service fee (or $120 per year) to cardholders who took advantage of Chase’s balance transfer program and haven’t made significant headway towards paying off their balances over the past two years.

In addition, Chase has raised cardholders’ minimum monthly payments to 5% (up from 2%) of their outstanding balances. According to online reports, Chase will only agree to waive the new fee and keep minimum monthly payments at 2% of the outstanding balance if cardholders agree to increased interest rates.Complaints allege that the new monthly fee directly violates the terms of Chase’s balance transfer program, under which cardholders’ transferred balances were subject to a fixed APR of 2.99, 3.99 or 4.99%.

Last month, a federal class action lawsuit was filed in California against Chase on behalf of cardholders affected by the new monthly service fee, alleging that cardholders who participated in Chase’s balance transfer program are being forced to decide between paying the service fee and increased minimum monthly payment or accepting an increased interest rate of 7.99%, which in some instances, exceeds the previously promised fixed rate by 5%.

Got Gold? – Not Enough to Go Around

February 24, 2009

With the stock market tanking on a weekly basis, and the price of gold hitting all time highs, is it time to rethink our dependency on paper money and go back to the “gold standard?” Sorry, there’s not enough to go around.

Our money system used to be tied to the gold standard. For every federal dollar in circulation, we had precious metals to back up its value. Through a series of economic moves from World War One to 1971, we eventually went off any gold standard and began to rely on what is called “fiat money” – paper which is money simply because we say so. In 1939, the federal government took gold coins off the money market and required all Americans to turn in their gold coins. For a time, Americans also used “silver certificates” as money, but they were taken out of circulation in 1968.

Now, however, gold coins are available for collection, and privately held gold is traded daily. Currently, an ounce of gold is trading at figures close to $1,000, almost an all-time high.

How much gold, however, actually exists in the world? You will certainly be surprised to hear the answer – not that much.

Gold is a precious metal because, indeed, it is an extremely rare element. In ancient times, it had intrinsic value due to its rarity, high malleability and looks. Spanish conquistadors exhausted themselves looking for “cities of gold” in the New World.

Given this long history, how much gold do you think has been found in recorded time? Experts who estimate this sort of thing have concluded that “only” 160,000 metric tons of gold have been mined in all of history.

Sound like a lot? For us metrically impaired Americans, let’s first convert everything to good old American pounds and dimensions. 160,000 metric tons is the equivalent of about 176,000 American tons (2,000 pounds, called “short tons”). In round numbers that means 352,000,000 pounds of gold have been discovered in recorded history. At 16 ounces to a pound, that means that we humans have put our hands on about 5.5 trillion ounces of gold.

Again, sound like a lot? Remember, gold is a very heavy metal. The largest form of a gold bar (called a “London Good Delivery Bar”) contains 400 troy ounces of gold, or 438.857 American ounces (about 27.5 pounds). Such a gold bar is 8.3 inches long, 3.3 inches wide, and 1.9 inches thick (not exactly the huge gold bars you may remember from the Bond movie “Goldfinger”).

If you converted all the gold ever mined into gold bars, you would have 12,700,000 gold bars. Ft. Knox, the U.S. gold depository, has 368,000 of these gold bars in its vault. At its currently traded price, that comes to just over $147 billion in gold.

Put all of that Ft. Knox gold into one pile, and you would have a cube 6.3 feet on each side. That’s it. Such a cube could fit into half of one room of a two room apartment. You’d better have a strong foundation, however, because that big gold cube would weigh 5,040 tons, or about as much as 1,100 average sized African elephants (yes, gold is that heavy).

In fact, if you piled up all of the gold mined in recorded history, you could just fill just one third of the Washington Monument or, instead, two Olympic sized pools. That’s it.

Current American gold reserves amount to $147 billion. Today’s economic news has made even a trillion dollars sound like only a down payment on the near future. If we forced gold to be the standard behind all of this country’s money, the price of gold backed by Ft. Knox’s reserves would have to be $56,000 per ounce instead of $1,000 per ounce. On second thought, maybe you’d better hold on to those gold coins you collected.

Three Little Words to Fight Foreclosure

February 24, 2009

ABC’s Good Morning America profiled the grassroots effort to fight foreclosure launched by the Consumer Warning Network.  It’s as simple as saying “produce the note” to your lender or servicer.  They should be held accountable to prove they have the right to foreclose on your home, and you can do that with this strategy.  Watch the story above by ABC’s Senior Law & Justice correspondent Jim Avila.

FOX Orlando TV Station Spreads Word on “Produce the Note”

February 23, 2009

Central Florida is one of the areas hardest hit by foreclosures around the country.  The FOX Orlando TV station picked up on the Consumer Warning Network’s grassroots revolution sharing the strategy with viewers.  Fox Orlando’s Steve Gelbach reports.

And the Chicago Tribune reports on how distressed homeowners are fighting foreclosure by taking their lenders to court.  Tribune Reporter Becky Yerak mentions the Consumer Warning Network’s efforts to help homeowners.  She writes:

Homeowners who feel they’ve been treated unfairly by lenders are fighting back.

Read more

The Sallie Mae Fund – Serving Charity or Promoting Business?

February 20, 2009

By Jim Ross:

At a time when student loan defaults are at an all-time high, and the benefits of higher education are consistently exaggerated, Sallie Mae, the country’s largest student lender, is using its own “charitable foundation” to promote itself, urge teenagers to attend college and, until recently, help them fill out the financial aid paperwork needed for government loans. Last year, Sallie Mae earned $2.5 billion in income from federal loans.

For five years, The Sallie Mae Fund, Inc. – a non-profit arm of lender Sallie Mae’s corporate family – rolled into towns across America in an eye-catching, high-tech bus packed with motivational speakers who urged low-income and minority students to go to college.

After presentations of up to 90 minutes, teenagers were invited to board the bus where they could  “begin the federal financial aid application process at one of four, Web-enabled workstations.” As one speaker captured in a 2006 bus tour video explained it: teenagers must fill out an application or the college’s financial aid office wouldn’t know they exist.

At separate workshops, “volunteers” from Sallie Mae (the lender, not the charitable company) helped youngsters and their parents fill out financial aid applications, the first step in obtaining the government loans.

The bus and the free handouts were stamped with the Fund’s trademarked four-word logo, which features an oversized version of the student lender’s familiar brand name, Sallie Mae.

But according to the Sallie Mae Fund, the programs aren’t designed to drive business to Sallie Mae, nor to promote brand awareness for the lender. So said Erin Korsvall, who serves both as a vice president of the non-profit Fund and as director of community outreach at for-profit Sallie Mae Inc.

The Fund encourages young people to set their sights on college and shows them how to reach their goal, she said. It uses its name to identify events it sponsors and publications it produces, she added. “Every foundation uses its name,” Korsvall said. “It’s common practice.”

Volunteers from the student lender, she added, simply were helping young people and their parents fill out financial aid forms at workshops promoted by the non-profit charity. Other volunteers also helped, she said, including present and former college student aid advisors.

“They are very, very carefully trained to not mention Sallie Mae and not to talk about specific loan products,” Korsvall said. “It is completely objective and non-biased.”

These programs are paid for with millions of dollars in charitable donations that provide the for-profit lending company with tax breaks of up to 50 percent.  Public tax filings paint a sketchy picture of Sallie Mae’s charitable donations and expenditures. For more details, read “MAKING CHARITY PAY“.

The arrangements provide a glimpse into the secretive world of charitable giving and spending directed by donors and subsidized by taxpayers through loosely regulated donor-advised charitable funds like the one created and used by the Sallie Mae corporate family.

Last month, the IRS concluded some donor-advised funds “appear to be established for the purpose of generating questionable charitable deductions, and providing impermissible economic benefits to donors and their families … and management fees for promoters.” For more details, read “BIGGER TAX BREAKS, FEWER STRINGS, MORE ABUSE.”

“It’s all a mystery with the current regulations or the lack thereof,” said Niki Jagpal, the research director of the National Committee for Responsive Philanthropy, a watchdog group. “The bottom line is who’s benefiting.  This shouldn’t be a mystery. It should be transparent. What is the public good?”

Korsvall said Sallie Mae’s arrangements are simply the most cost efficient way to meet the philanthropic need. The program, she said, is designed to provide college awareness, not drive borrowers to Sallie Mae or bolster its brand.  

The amount actually contributed by the Sallie Mae corporate family and how it is spent can’t be accurately determined because the loose federal regulations don’t require the donor or the charities themselves to make detailed public disclosure.

The Fund’s public filings disclose about $14 million in contributions and spending. But it claims in press releases that it spent $125 million on grants, scholarships and college access programs since 2001. Korsvall said the donor-advised fund — called the Sallie Mae Fund — pays for the scholarships, grants and other programs directed by the private foundation, The Sallie Mae Fund, Inc.

When asked by the Consumer Warning Network for a detailed listing of donations, contributions and spending recommendations, Korsvall responded: “We don’t typically publish the list.” She referred further questions to the donor-advised fund that she says her private foundation directs. Korsvall said she would consider producing a detailed listing, but none was forthcoming.

Like Korsvall, many of the staff directing the Fund’s non-profit activities also work for either Sallie Mae Inc.,  or Sallie Mae’s corporate parent SLM Corporation. Over the years, the private foundation’s directors have included top officers of SLM Corporation as well as executives of Sallie Mae Inc., the for-profit management and marketing arm. For more details, read “SALLIE MAE FUND/SLM CONNECTIONS.”

The stated mission of The Sallie Mae Fund is to increase access to higher education for low-income and minority students.  At workshops across the country, it tells parents and their children how to pay and plan for college. From 2002 through 2007, it spent $3.4 million on these coast-to-coast bus tours where it awarded individual scholarships of up to $1,000 at each stop, $2.9 million more on “paying for college” workshops, and $1.6 million on educational materials, which include brochures and directors of scholarships.

The Fund gets the word out with the help of advertising agencies, including at least one that lists Sallie Mae as a client and paid colleges to provide speakers.

Another ad agency paid by the Fund also represents “2Futuro,” a  bilingual college-financing and outreach program for post-secondary education set up by Sallie Mae and its frequent contractor USA Funds. 2Futuro boasts that it is the only national program for borrowers to apply for loans online in Spanish or English.

Major scholarship programs are administered by its non-profit partners, which select recipients. Some of its other programs are offered in conjunction with the government and the media. The Fund doesn’t accept unsolicited grant applications.

Although its partners administer the scholarship programs, Korsvall said the private foundation, the Sallie Mae Fund Inc., determines the criteria used to “shape” and award them. The private foundation then “recommends” that the donor-advised fund, the Sallie Mae Fund, pay for the program, she said.

Korsvall said the recommendations were followed without exception. It is, she emphasized, a cost effective way to manage community giving.

“They aren’t necessarily breaking the law. The question is who is benefiting,” said Jagpal, the research director of the watchdog group. “What is the purpose? Is the public interest being met? If that’s all it’s doing I think there are serious questions. “

Next Page »