The latest trend in scamming homeowners into eliminating their debt appears to be the implementation of mortgage elimination schemes. Through these schemes, often victims often times pay up front fees to an “agent” who promises to eliminate their mortgages without them having to repay the debt they have incurred. The agent either then disappears with the cash the homeowners provided up front, or they launch an even more developed and complicated plan.
One of these plans begins when independent agents of larger “companies” approach homeowners and convince them that their lender is guilty of violations against the homeowner, or has behaved unethically in the lender market. Homeowners are then to place the home in a family trust that names the independent agent as a trustee to the property. Then, the agent files a quit claim deed that names him as the owner of the property.
Once the trustee has been named the homeowner, he approaches the original lender with a document listing multiple offenses against them. These documents have been named “CPA reports” by industry experts. If the lender fails to respond to this document with a proof of validity, the trustee then files a power of attorney to act on behalf of the lender. The trustee will then file a “Discharge of Mortgage” document that certifies the loan has been fully paid.
The trustee then applies for a loan refinance. The original homeowner and the named trustee then divide these funds and use the same scheme to receive a second “Discharge of Mortgage” on the property. In reality, the homeowners have now become guilty of fraud, but most are assured by the agent that the activity is legal and never demand legal clarification of what officially occurs.
This scheme appears to be rampant in the United States, as claims have been filed in Wisconsin, Ohio, Oregon and California, listing several companies as the main executors of this scheme. The Dorean Group of Oakland California, Redwood Trust of New York and Capital Creation Resource are three of the most active perpetrators of this crime within the national realty market.
Upon investigating these companies, the Better Business Bureau uncovers that most have fraudulent phone numbers, the offices do not exist at the locations provided and the trustees have no listed telephone numbers. When approached by the BBB about these companies, and their schemes, many lenders were not even aware that they existed. Several of the lenders the BBB contacted had only recently learned of the scheme and knew little to nothing about the companies perpetrating these crimes.
One of the companies, Redwood Trust, which has been active in this scheme, informed homeowners that their loans were being paid off by humanitarian funds. The company, based in New York, was exposed when Ohio residents became suspicious of the firm and contacted the BBB. After a brief investigation, the BBB learned that Redwood Trust remains under investigation for similar complaints in Oregon.
According to a release issued by the Greater Cleveland Better Business Bureau, these schemes promise major results while remaining aloof on how these results are obtained for the homeowner. Most involve the development of false documentation that claim to release the homeowner from their initial mortgage while implementing a second loan on the property; thus, unknowingly leaving the homeowner responsible for both debts.
The seriousness of these schemes has even come to the attention of the Federal Bureau of Investigation. The major components that worry the FBI are the size of the targeted audience and the ease at which the companies disappear after they have targeted a specific area of the United States.
These are not the first examples of mortgage elimination schemes in the U.S. They have been carried out for years and have always targeted the ill-informed consumer on what is legally legitimate and what is not. Most often the consumers did not know they had broken any laws or been involved with any type of scheme until they were left holding two mortgages or were being accused of fraudulent activity by a financial or government body.
The Office of the Comptroller of the Currency, the division of the U.S. government that regulates and reviews the activities of all national banks addressed this issue in October 2003 when it warned financial institutions not to accept illegitimate documents that professed to eliminate legitimate debts. The investigations into multiple companies, such as eliminatemortgage.com and goodbyemortgage.com, had already piqued the OCC’s interest into companies promising consumers they could provide them with quick relief from mortgage debt. The statement the OCC released, at the time, indicated that the formation of these companies and their actual documents may have even violated criminal statutes.
These schemes also play a significant role in the title industry because title examiners could mistakenly accept the falsified documents as legitimate forms and disclose to the lender that a piece of land has a clear title.
Industry experts warn the most common result of homeowners falling victim to this scheme is foreclosure on their homes. They assume that they have removed the mortgage on the property and only pay the refinancing loan. The original lender, however, is still owed the money it provided the borrower. Most courts recognize the original lender for the money it lent and this leaves homeowners responsible for both mortgages.
According to officials within the Better Business Bureau, homeowners who participate in schemes to remove their mortgage can face serious legal problems, including default on their original mortgage, foreclosure, future difficulty selling the home due to title issues and trust claims, the possible liability for additional loans on the property, and even being considered an accessory to a criminal activity.
Thus, the Better Business Bureau is asking customers to apply skepticism when dealing with any company that claims it can easily and legally eliminate a mortgage claim. If the deal seems too good to be true, it most likely is. The legal issues that may develop from homeowners’ involvement in these schemes greatly outweigh the benefits of erasing their original mortgage.