By Janine M. Atamian
Executive vice president
of settlement services
Lincoln Appraisal & Settlement Services
Fraud Report Opens Door to Client Education pe o C o
By warning clients about common scams, brokers can educate and aid
This past May, the U.S. Depart- ment of the Treasury Financial Crimes Enforcement Network
(FinCEN) published its Mortgage Fraud
Report ( sctsm.in/FinCenM), noting
trends related to loan-modification and
foreclosure-rescue scams.
Mortgage brokers can use the report
information to educate homeowners
needing loan-modification services.
By outlining concerns and making consumers aware of fraud attempts and
trends, brokers can gain credibility.
They also can leverage the report by
sending direct mailings and newsletters to prospects and by posting relevant information about the findings
on their Web site. Those who do also
should consider noting if the states in
which they operate require a license to
act as a loan-modification negotiator.
If applicable, brokers also can dis-
cuss states’ fee limits with their clients
and explain their policies for abiding by
these limits. In many ways, brokers are
in the best position to educate consum-
ers, many of whom might not realize
that under no circumstances should a
negotiator require the signing of a deed
whereby property is transferred.
would help identify and address loan-modification and foreclosure-avoid-ance fraud. In this advisory, it provided
guidance on the preparation of SARs
and identified potential red flags.
In response to the advisory, the
number of SARs by entities required to
produce them increased to more than
3,000 in 2009 from 28 in 2004.
This past May’s report, which includes
statistics from ’04 to ’09, reflected that
increase and identified distinct patterns
in the perpetration of fraud. More specifically, it outlined two typical scenarios
that dominated loan-modification and
foreclosure-rescue scams:
1. Use of straw borrowers, equity-
skimming, property theft or a com-
bination of them
2. Advance-fee scams
Although the bulk of SARs came in
2009, many scams remained undetected for years after the suspicious activity occurred. According to the FinCEN
report, not only was there fraud in the
loan-modification industry, but it also
was multilayered and thriving — and
had been for some time. A CoreLogic
report released this past July, meanwhile, revealed that mortgage fraud
has declined since 2007.
On the Web
• Q& A with U.S. Department of
the Treasury Financial Crimes
Enforcement Network (FinCEN)
director James H. Freis Jr. (
February 2010 Scotsman Guide):
sctsm.in/3955
• FinCEN Mortgage Fraud Report,
May 2010: sctsm.in/FinCenM
Fraud patterns emerge
By collecting and analyzing data — and
by providing guidance, regulatory information and training to financial institutions and criminal investigators
— FinCEN helps in the fight against
mortgage fraud. The organization often relies on the filing and analysis of
suspicious-activity reports (SARs) for
insights and data points.
In April 2009, FinCEN issued an advisory report requesting information that
• FinCEN Suspicious Activity
Report form: sctsm.in/
SARSform
Now in New Jersey
“Brokers can act as
negotiators t a by
approaching lenders with
modification plans that
offer advantages a ag
to all parties involved.”
he first three questions we get from Loan
Officers looking to join the CRL team
are “Will you still be in business tomorrow?”,
“Are you going to be able to pay me?” and
“Are you going to lose your licenses and lender
relationships?” The answers: a resounding YES,
YES and NO!
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We take pride in our stability and know we’ll
be around for a long time because we do
business the right way. From cash;positive
payment that’s always on time (as soon as
escrow closes) to exceptional relationships
with lenders nationwide, CRL is built on a
strong and sturdy foundation. If you want to
avoid the hassles of “fly by night” mortgage
companies, let CRL show you a better way to
reach new heights of success in this industry!
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According to reports, fraud contributed to the subprime (aka, nonprime)
mortgage collapse. Here’s a closer look
at two typical loan-modification and
foreclosure-rescue fraud attempts.
and lending guidelines were loose
and no-income-verification programs
were popular. The scams generally
involved a “specialist” who required
borrowers to deed their home to another individual in a sale transaction,
after which the original homeowners
would rent to own until their credit or
financial position improved. At that
time, the specialist would help the
borrowers repurchase their home
under favorable loan terms. Alternatively, the specialist would agree
to sell the property and take part of
the proceeds, a process known as
equity-skimming.
Often, the original homeowners remained in the house and paid rent to
an individual who didn’t make the requisite mortgage payments. This left the
original homeowners facing foreclosure and eviction. In some cases, the
so-called specialist would be the purchaser in the new transaction.
After the sale closed and the deed
was recorded, the scammer would resell the house for a higher price in the
inflated market. In other cases, a group
would flip the property several times at
inflated prices.
In other instances, the scammer
would enlist a straw buyer to purchase
the home. The scammers would then
take out a loan on the property, extracting all the remaining equity, another
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To learn more, call or visit us online:
Straw borrowers
In almost all loan-modification and
foreclosure-rescue scams, the scam
artist purported to be a qualified specialist and preyed upon financially troubled homeowners who typically were
older. In many scenarios, the scammers
not only defrauded the homeowner but
also deceived a new lender.
The popularity of straw-borrower
scams increased during the height
of subprime lending, when credit
Janine M. Atamian is executive vice president
of settlement services for Lincoln Appraisal &
Settlement Services. She worked in the mortgage industry for more than 15 years and has
experience in origination, processing, funding and compliance. Atamian has handled
mortgage broker, banker and loan-originator
licensing in 33 states. She has dealt with
regulatory-compliance audits and repurchase demands and has experience in all
aspects of settlement services. Contact (401)
831-3500 or info@lincolnappraisal.com.
Visit www.lincolnappraisal.com.
