Foreclosure Predators Rampant in the Valley

Friday, June 5, 2009
Andres Chavez
The San Fernando Valley Sun

The housing crisis is drawing out foreclosure predators like wolves to an unguarded flock. "The main emphasis here in the City of Los Angeles is foreclosure fraud but it is rampant across the country. I think the Valley and South Los Angeles are two higher frequency areas (of foreclosure fraud)," said Detective Erin Camphouse, of LAPD Real Estate Fraud Unit. She spoke to Valley residents at a Town Hall meeting on foreclosure fraud at the Shepard of the Hills church in Porter Ranch.

When a notice of default is recorded, it becomes public record. This provides the scam artists a list of potential victims. They will contact people through the mail or by coming in person. Homeowners facing foreclosure are especially vulnerable because they are usually desperate and don't know what to do. Most lenders will only deal with the homeowner and scammers take advantage of this.

They will tell the homeowner they can save their home but in order to do so they need the title, or a fraction of the title and they'll renegotiate the loan, with better interest rates-something the homeowner can afford. But what really happens, Camphouse said, homeowners discover "The entire title is no longer in their name and they're still held responsible for the mortgage and these crooks did nothing to further a resolution to their problem."

Another hustle is to convince the homeowner to sell their property to the crook really cheap say $10,000 cash with the promise that once the homeowner gets back on their feet, clean up their credit, or get another job, whatever scenario works, they will sell the house back to them. Perhaps in a year or 18 monthshowever long the homeowner thinks it will take. "Well, in the mean time," Camphouse explains, "the crook has either sold it again and they have no chance in recovering it or borrowed against it, draining every ounce of equity and more is owed than these people could ever afford."

Renters are not safe either. Here are two variations on a scam. In the first, the crook finds an empty house going through foreclosure. He advertises it for rent, rents it to some unsuspecting person. He collects the rent for as long as possible. Meanwhile, the property clears and is purchased by a new owner who comes to see his purchase only to discover someone living there. At this point, the police and the courts become involved and the renter, who thought he was doing the right thing, and the new owner, have major problems to resolve. The crook has the money.

The other variationmay be crueler. The crook advertises a house for rent in a newspaper, craigslist or through some other means. The ad says something like "I'm renting a house in Granada Hills, if you want to come look at it, it's going to be open Tuesday." Captain Sean Kane of LAPD Devonshire area explains that on Tuesday, "Five different people show up at five different times and he rents to all five. And they all show up a week later and say 'what's up?" The crook has collected the deposits from all five people, say first and last months rent. At $2,000 or $2,500 a month, the individual families are out a significant amount of money with little chance of getting it back. The crook, however, has enjoyed a big payday.

There are cases where the crook has actually helped a homeowner save his home but Camphouse warns that it's just a come on. "[They gain the] confidence of the person that they helped but then they use them to spread "their good name" out there. That's when they put on the predator type moves and it's not their intention anymore to play by the rules. They'll make as much money as they can make and they'll make it at whatever cost," she said.

There are no statistics on how large a problem real estate fraud is because the fraud cases can be reported under other categories like identity theft, forgery, grand theft, etc. There are some indirect indications. Last year there were 23,300 foreclosed houses in the county of Los Angeles. This year the figure is 32,300, which means the crooks have more opportunities to work their scams. Which might explain why Detective Camphouse workload has increased two to three times over the last twenty months. Camphouse's workload is indicative of the work being done by the Real Estate Fraud Unit. Both the LAPD and the Sheriffs Department have units working real estate fraud.

How can a homeowner whose property has gone into foreclosure protect himself? The first thing to realize is that there will be a ton of mail offering help. Camphouse's advice is to ignore all of it. "Legitimate organizations are so over taxed right now that they are not doing any solicitation, so they're not going to get a post card or any type of solicitation from these organizations," she said.

Camphouse recommends contacting the Los Angeles County Department of Consumer Affairs or HOPE, which will give credit counseling and contacts with legitimate people who can help. Another organization is the Los Angeles Neighborhood Housing Services.

If you start to get mail at your home with someone else's name on it, that should be a big red flag. Check with the county to see if your property has someone else's name on it. Monitor your credit. The three major credit agencies will give you a free credit report once a year. Stagger the request among the agencies so you check your credit every four months.

If you're a renter living in the City of Los Angeles under the terms of the Rent Stabilization Act, if the house or building you live goes into foreclosure, you cannot be made to move until a new owner has purchased the property. Even then, the new owner has to give adequate notice before the renter has to move.

The State of California is also moving to protect consumers. Monday California Attorney General Jerry Brown issued a directive that consultants who try to renegotiate mortgages on behalf of distressed homeowners will have to register with the state and post $100,000 bonds. This directive does not apply to attorneys and real estate brokers who represent buyers. Rather it targets people who engage in this activity without regulatory oversight.

Brown stated in the news release announcing the directive that, "California is awash with con artists who prey on vulnerable families facing foreclosure. This registry will help bring long-overdue transparency to this shadowy world." They must register with Brown's office by July 1, 2009. Violators could get up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

In the end, the homeowner going through foreclosure has some tough decisions to make. Some people need to realize they may not be able to afford their home anymore. It's pointless to borrow money from family and friends to save your home if it's just a matter of a few more months before you're in the same position again.

"You have to decide if it's worth it to try to fight and get some help or let your home go to foreclosure or try to negotiate with the bank, and only your bank, and do, if it is feasible, a short sale so you don't have that foreclosure sale against your credit history," Camphouse said.

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