St. Louis Beacon – There’s A Scammer Born Every Minute

July 30, 2008
July 30, 2008

Originally published by The St. Louis Beacon on Wednesday, July 30, 2008:

By Mary Delach Leonard, Beacon staff   
 
For American homeowners drowning in mortgage and consumer credit debt, here is a grim warning from law-enforcement agencies: There are sharks in the water.

 * On Monday, Missouri Attorney General Jay Nixon announced “Operation Stealing Home” to crack down on mortgage fraud and financial predators taking advantage of homeowners facing foreclosure. Nixon’s office filed lawsuits against seven individuals and businesses accused of defrauding customers through refinancing, advance fee and foreclosure consulting scams.

* In May, a national alert against foreclosure scams was issued by the U.S. Treasury Department’s Office of the Comptroller of the Currency, which charters, regulates and supervises all national banks.

The alert warned against variations of lease-back and repurchase scams that promise financially distressed homeowners they can stay in their homes.

Basically, the schemer offers to pay the mortgage and rent your home back to you. Often, they may promise to sell the home back to you when you’ve recovered from your troubles. In the meantime, the homeowner is asked to transfer the property deed, often to a third party, who now has the power to sell your house, charge you sky-high rent, evict you and, most likely, steal whatever equity you had in the house. In the meantime, you are still responsible for the mortgage and if the schemer stops making your monthly payments, you still end up in foreclosure.

* Local FBI agents are actively investigating mortgage fraud in the St. Louis area, with the U.S. Attorney’s office prosecuting nine cases between March 1 and June 18. “Operation Malicious Mortgage,” a national FBI effort during that same time, netted charges against 406 defendants, responsible for $1 billion in fraud. Nationwide, the FBI has 15,000 mortgage fraud cases pending, up from 436 in 2003.

Maxwell Marker, assistant special agent in charge of the FBI’s St. Louis division, said that as funding dried up in the mortgage market, schemers began shifting to foreclosure-based scams.

“They’ll identify individuals who are in financial distress but have some degree of equity in their property. They essentially make an offer that can’t be refused,” he said.

Marker said the FBI has seen lease-back schemes in St. Louis but not to the degree that it has occurred in other cities, such as Atlanta, Las Vegas or on the West Coast, where the fallout from the mortgage crisis has been more severe.

The most common form of mortgage fraud in St. Louis is a form of flipping. Schemers purchase run-down properties and then resell them at huge profits, based on fraudulent appraisals claiming rehab work that was never done, said Alan Peak, supervisory special agent of the St. Louis FBI.

“They go into targeted areas and purchase vacant properties for $30,000 or $40,000. Sometimes, in as little as 72 hours, they will sell those properties to a straw buyer they have lined up, in some cases for $130,000 or $140,000 using a fraudulent appraisal report,” Peak said.

Ultimately, the mortgages are sold on the secondary market and the property ends up in foreclosure again, still in the same run-down condition and still worth only $30,000 or $40,000. In the short term, though, property values in the neighborhood go up, driven by the inflated sales prices. That, in turn, drives up property tax assessments. When the schemers pull out, property values plummet, and the neighborhood is left holding the bag.

“We’re all the victims,” Marker points out. “It affects every single one of us. It affects us in the fees we pay to get a mortgage. It affects us in our property values. It can affect individuals from $20,000 properties to multimillion-dollar properties. It affects the gamut.”

Mortgage fraud can take years to unravel, the agents say. In one of the biggest local cases, the FBI tracked 65 flipped properties to the same group.

Marker said the scammers usually target individuals who are unsophisticated in financial matters, or they work through places of trust, such as churches. They might co-op a church member who will then share his or her good fortune with others. And they are industry-savvy.

“They’re very good at exploiting any crack in the system. We’ll identify one of those cracks and work with the industry to close it, and they’ll move somewhere else,” Marker said.

Expect to see the Missouri attorney general’s office file more lawsuits against predators, said John Fougere, a spokesman for Nixon. Fougere would not put a number on pending investigations but said announcements of such legal actions often spur other consumers to contact authorities about similar experiences.

Fougere said predators take advantage of flood and tornado victims, so it is not surprising to find them at work during a financial crisis.

Even people who know better can fall for schemes when faced with financial troubles, the FBI agents say.

“When somebody is desperate and they see that life (preserver) ring out there, they’ll grab for anything,” Marker said.

The agents say they will be watching for new schemes after housing-rescue legislation is signed into law.

“Anytime there’s a big pool of money out there, there are bad guys lurking in the shadows trying to figure out how to get their hands on it,” Peak said.

REPORT IT

Law-enforcement officials say fraud often goes unreported because the victims are either embarrassed, or they don’t think there is anyone who can help them.

“Folks often think, ‘Oh, this is just about me, and it’s not a federal matter,” said agent Maxwell Marker of the St. Louis division of the FBI. “We may not be able to address your individual case right now, but we will take all your information and data. It’s very important that we have that intelligence, so we can start connecting the dots.”

St. Louis FBI: (314) 231-4324

Missouri attorney general’s Consumer Protection Hotline: (800) 392-8222 or http://ago.mo.gov  

Illinois Attorney General Consumer Fraud Hotline: (800) 243-0618 www.IllinoisAttorneyGeneral.gov  

For more fraud advice, visit the St. Louis Beacon’s Web site.


“Thank you so much…”

July 30, 2008
July 30, 2008

A comment received from one of our Facing the Mortgage Crisis programs:

THANK you so much for the informative information you presented on the St Louis area foreclosure issues facing many of us.  Because of your broadcast I FINALLY knew where to turn for help and assistance.  I only wish the broadcasts had been much earlier in the year.  Perhaps then I wouldn’t find my husband and me in the situation we are now in.

The very next day after the first broadcast we contacted Beyond Housing and made an appointment.  As was stated in the broadcast and on the phone we had all the information with us that was required.  Linda Ingram was wonderful.  She did not look down her nose at us, she treated us with dignity in a very embarrassing financial situation, she was able to contact people at the mortgage company I was never able to get through to and now, with her help, someone is finally looking at our situation and trying to help us with a modification.

Linda was also able to give us some other tips and pointers.  She gave us lots of information including Angel Food Ministries, which I plan on calling and placing an order with in August.  I know there was a brief clip on TV about Angel Food Ministries, but most people probably feel it is for lower income families – it isn’t.

Once again – THANK YOU SO MUCH FOR YOUR INFORMATIVE PANEL AND A SPECIAL THANKS TO RUTH EZELL FOR A GREAT PRESENTATION AND THE RESPECTIVE REPRESENTATIVES FROM THE VARIOUS AGENCIES.

Sincerely,

Mary L


South St. Louis – Living St. Louis Video

July 29, 2008
July 29, 2008

Living St. Louis Producer Jim Kirchherr visits South St. Louis, one of the first communities in the area to see a dramatic rise in foreclosures. In the Dutchtown neighborhood, many of the properties that are owned by rehabbers and investors have fallen into disrepair.


Video – Facing the Mortgage Crisis, July 22: Part IV

July 24, 2008
July 24, 2008
On July 22, KETC’s Ruth Ezell hosted the second of a two-part series entitled, Facing the Mortgage Crisis. The show covers the important topics regarding foreclosure that affect not just St. Louis, but communities nationwide. Neighborhoods with foreclosed homes attract criminals and experience a higher rate of vandalism and crime. Neighborhood stabilization is something that entire communities should join together and work towards.

Panelists include: Stephen Acree, Regional Housing and Community Development Alliance; Pamela Tucker Coaxum, Enterprise Community Partners, Inc.; Chris Krehmeyer, Beyond Housing; Karen Wallensak, Catholic Charities.


Video – Facing the Mortgage Crisis, July 22: Part III

July 24, 2008
July 24, 2008
On July 22, KETC’s Ruth Ezell hosted the second of a two-part series entitled, Facing the Mortgage Crisis. The show covers the important topics regarding foreclosure that affect not just St. Louis, but communities nationwide. Neighborhoods with foreclosed homes attract criminals and experience a higher rate of vandalism and crime. Neighborhood stabilization is something that entire communities should join together and work towards.

Panelists include: Stephen Acree, Regional Housing and Community Development Alliance; Pamela Tucker Coaxum, Enterprise Community Partners, Inc.; Chris Krehmeyer, Beyond Housing; Karen Wallensack, Catholic Charities.


Video – Facing the Mortgage Crisis, July 22: Part II

July 24, 2008
July 24, 2008
On July 22, KETC’s Ruth Ezell hosted the second of a two-part series entitled, Facing the Mortgage Crisis. The show covers the important topics regarding foreclosure that affect not just St. Louis, but communities nationwide. Neighborhoods with foreclosed homes attract criminals and experience a higher rate of vandalism and crime. Neighborhood stabilization is something that entire communities should join together and work towards.

Panelists include: Stephen Acree, Regional Housing and Community Development Alliance; Pamela Tucker Coaxum, Enterprise Community Partners, Inc.; Chris Krehmeyer, Beyond Housing; Karen Wallensak, Catholic Charities.


Video – Facing the Mortgage Crisis, July 22: Part I

July 24, 2008
July 24, 2008

On July 22, KETC’s Ruth Ezell hosted the second of a two-part series entitled, Facing the Mortgage Crisis. The show covers the important topics regarding foreclosure that affect not just St. Louis, but communities nationwide. Neighborhoods with foreclosed homes attract criminals and experience a higher rate of vandalism and crime. Neighborhood stabilization is something that entire communities should join together and work towards.

Panelists include: Stephen Acree, Regional Housing and Community Development Alliance; Pamela Tucker Coaxum, Enterprise Community Partners, Inc.; Chris Krehmeyer, Beyond Housing; Karen Wallensak, Catholic Charities.