Foreclosure Rescue Scams
July 21, 2008 -- Foreclosure rescue scams are a form of predatory lending that became increasingly common during the mortgage bubble. Persons describing themselves as "lenders" took advantage of fraud and corruption in the mortgage industry to steal equity from unwary homeowners. These scams take a variety of forms, but the experience of Brayton Purcell client Robert Harrell is fairly illustrative.
Mr. Harrell's troubles started in 2006, when he fell behind on the payments on his $345,000 mortgage on his house in Richmond, California, which was worth about $550,000 at the time. His mortgage broker--who was supposed to be representing him as his fiduciary--set him up in what was supposed to be a bridge loan that would pave the way for a more permanent solution, or at least give him time to sell his house. An agent from a company called Virtual Escrow--which the California Attorney General recently shut down based on similar predatory lending issues (Office of the Attorney General, Press Release, March 18, 2008)--arrived at his house to have him sign the paperwork.
At the close of the transaction, however, Mr. Harrell had unknowingly signed away the title to the property in exchange for a $20,000 payment. The so-called lender never really lent Mr. Harrell any money at all. Instead, playing the role of a buyer of the property, the scammer borrowed $550,000 against the house. This left him roughly $175,000 after paying off the $345,000 existing mortgage and "lending" $20,000 to Mr. Harrell. Part of this money went to paying Mr. Harrell's mortgage broker a substantial fee for setting things up.
Brayton Purcell is representing Mr. Harrell in an action to get his home back, or at least the equity that was stolen from him. If you feel you have been a victim of a foreclosure rescue scam, or some other fraudulent or predatory lending arrangement, you can contact us to evaluate your case.
What Is Predatory Lending?
Predatory lending practices are abusive practices that strip borrowers of home equity and threaten families with bankruptcy and foreclosure, their credit ruined. Predatory mortgage lenders specifically target low-income homeowners and individuals who are financially vulnerable, such as the elderly, minorities and women. However, predatory mortgage lenders have expanded their "business" to include middle-class, working class, and rural homeowners.
There are no legal definitions of predatory lending in the United States, but the concept is based on who benefits in the mortgage transaction--if the homeowner does not benefit, the mortgage transaction is predatory lending. Predatory lending practices occur when a broker or a mortgage company pushes unjustifiably expensive refinancing loans or home equity loans that they know the borrower will never be able to repay.
Have You Been a Victim of Predatory Lending Practices? Brayton Purcell Can Help
Not everyone facing foreclosure loses their home. Some are able to sell their homes before foreclosure; others arrange a payment plan with their lender. In most states you can file for bankruptcy which will stop foreclosure proceedings. For more information on home ownership and foreclosure, you may read our previous article, How to Avoid Foreclosure or visit the HUD web site.
If you have a legal problem involving predatory lending practices or mortgage fraud, our attorneys are here to help. You may contact our attorneys through this web site or at any of our law offices. We will arrange a convenient interview time and advise you of your legal rights. There is no charge for an initial consultation. We have offices in Portland, Oregon, in Northern California, in Southern California and in Salt Lake City, Utah.