Hard Times Update: Tales of Foreclosure Schemes, Mortgage Misfortune

Send Us Your Tips and ‘Bandit Sign’ Photos

Last month, we put out a call for stories and photos to help document the effect that “Hard Times Profiteers” are having on distressed borrowers and others suffering financial hardship because of the recession. The response was robust. We received more than 100 tips from borrowers, tenants, real estate brokers, investors and others who have experienced or observed misfortune amid the current housing crisis. We also collected dozens of photos documenting bandit signs from California to Maryland.

That nearly half of the tips we received dealt with loan modification or foreclosure rescue schemes came as no surprise — complaints about advance-fee loans and credit repair schemes ranked 9th among those compiled in 2009 by the Federal Trade Commission, and the agency noted a 12 percent spike in fraud-related cases last year.

We’re in the midst of reporting out some of the most promising leads generated by our tipsters, but in the meantime, we’ve published several stories to our interactive map tracking “Signs of Deception.” Among the themes that emerged:

Loan Modification, Foreclosure Schemes

In one case, a woman from Mesa, Ariz. , was persuaded by a direct-mail advertisement to pay a lawyer up front for loan modification assistance. “The fee was $3800 to submit a home modification loan package… He did (at least he said he did) and I never heard anything more until about six months later I received a letter saying he was out of the home modification business and that I had $137.50 coming to me over and above the expenses it took him to submit. I was declined.”

A man in Bedford Hills, N.Y. , said he turned to a modification services company after having difficulty getting through to a nonprofit counseling service. “To get in contact with them over the phone was nearly impossible,” he wrote. So he paid $1,500 paid up front to a modification company that never delivered. “I got nothing done, they refused to give me my money back.”

Another reader in Petaluma, Calif. , took a chance on a company called 2nd Chance Mortgage, which charged $2,400 for its modification services. The man says he volunteered tax forms and hundreds of pages of documentation over eight months, but was denied. His lender says it never received paperwork from the modification service. “Losing $2400 is bad enough but not knowing where my personal information has gone is even worse,” he wrote. The state of California shut down 2nd Chance last March, but our reader worried that the company is still operating under a different name.

Investor Schemes

Borrowers aren’t the only ones getting trapped. The glut of distressed homes has also drawn the interest of small investors who are then targeted by shady real estate investment companies. One couple from Trabuco Canyon, Calif. , invested with a company that promised to manage their newly-acquired rental property. The couple is facing foreclosure after the company failed to rent the property or pay the mortgage. According to the couple, the company helped investors “purchase distressed homes from banks, rehab/upgrade them, and then sell them to other investors that want a rental property. My wife and I were the ’second’ investor that wanted a rental property. [They] promised to act as property manager, find renters, and guaranteed to cover the mortgage for up to one year until it was rented. After two months we asked a friend to check out the house and learned then that it was vacant.”

The Tenant Victim

As foreclosures soar, renters are also finding themselves increasingly at risk of losing their housing. Many are getting caught up inadvertently in foreclosure proceedings filed against large rental-unit developments and single-unit properties. But others seem to be deliberately targeted.

A woman in Hollywood, Fla., told of a friend who fell victim to a foreclosure scheme. The woman, who has a son with severe autism, reportedly paid three months’ rent in advance and signed a lease on a property that had already been foreclosed upon. “Yes, the home from which friends just helped her move had also undergone complete foreclosure with no prior notice from her landlord of many years, all the while she was paying rent.”

You can see these stories and bandit sign photos plotted on our interactive map at huffpostfund.org/profiteers. We’ve just created a new Hard Times Profiteers group on Flickr to make it easier for you to contribute photos, but you can still submit tips and photos at huffpostfund.org.  Thanks to all who’ve contributed already!