What have you always wondered about the economy? Tell us

Foreclosure fraud is on the rise

Marketplace Staff Apr 10, 2008

TEXT OF STORY

Scott Jagow: Today, we wrap up our series, Housing Madness… By talking to the FBI.
Now, why would that be the case? Well, mortgage fraud has climbed 800 percent in the past five years. There could be 60,000 cases this year. James Doran has our story, from New York.


James Doran: James Lashore is a disabled pensioner from Brooklyn, N.Y. He spent a lifetime paying off the mortgage on a smart limestone apartment house. But today, he faces losing it all because he was ripped off by a bogus mortgage broker.

James Lashore: Everything I worked for is tied up here. You know, my pension money, everything is in this building, you know.

And he’s not alone. Sharon Olmsby is chief of the FBI’s financial crime section. Olmsby says the housing market crash hasn’t stopped predatory lenders. If anything, she says, the criminals are increasing their efforts so that even people in foreclosure at risk.

Sharon Olmsby:

Well, the bureau has seen in the foreclosure market or foreclosure arena there are actually three types of schemes that people should be aware of.

The most common foreclosure scam is called “phantom help.” A mortgage broker might promise to stave off foreclosure and save your house. What he really wants, though, is to get his hands on any remaining equity or even the deed itself.

Olmsby: The second scheme is called the “bust out scheme,” and that is where an individual in foreclosure agrees to turn over their house to another individual in exchange for paying rent on the home.

Again, the fraudster’s aim is to rob the victim, not help him. Olmsby says a similar thing happens in the third type of foreclosure fraud, a simple bait and switch. With this one, the troubled homeowner is lured in with a tempting refinance offer. But if the scam goes to plan, it’s the fraudster who ends up holding the deed.

Olmsby: The complexity of the frauds and the growth has been both dramatic and significant.

The FBI says the numbers will continue to grow for at least another two years, meaning there’ll be many more victims just like James Lashore.

Lashore: You gotta start somewhere, you know. Because too many people getting hurt with these crooked people.

In New York, for Marketplace, this is James Doran.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.