Smith Dollar partner Rachel Dollar spoke on the Full Fraud Solution-from Prevention to Discovery panel, at the Mortgage Bankers Association- National Fraud Issues Conference in Phoenix, Arizona. She was joined by panelists Jenny Brawley, mortgage fraud investigator for Freddie Mac, Ann Fulmer, vice president of Interthinx, and Kathy Coon, chief appraiser/director of FNC, Inc. http://bit.ly/MBA412
Rachel Dollar, CMB, partner with Smith Dollar, Santa Rosa, Calif., said bankruptcy fraud has become one of the prime tools in fraud arsenal, because when a homeowner files for bankruptcy, it puts an automatic stay on foreclosure proceedings. In some cases, she said, bankruptcies have been filed multiple times, which is most likely illegal but also delays the process.
“Oftentimes they file the bankruptcy the night before an eviction, so the lender rarely gets the opportunity to file for relief from a stay,” Dollar said.
Dollar has also noted a sharp rise in “mortgage elimination” schemes, in which fraudsters persuade homeowners that paying principal, interest or taxes is not required because asking such is “illegal.”
“Your staff should be trained to identify and elevate these issues, because otherwise they can create unnecessary legal complications,” Dollar said. “’Crazy’ packages should be reported immediately to your company’s legal counsel.”
Similarly, Dollar noted an increase in “squatting” and claiming they have the right to take possession of foreclosed properties.
“There is no such thing as ‘squatters rights,’” Dollar said. “It’s trespassing and is a civil or criminal wrong.”
In some cases, squatters will move into abandoned or foreclosed properties, filing lawsuits claiming possession of the property. “It’s really just leverage to get lenders or servicers to get rid of the property,” Dollar said.
To avoid squatting, lenders and servicers must keep watch on empty properties, document vacancy, track “cash for keys” payment recipients and contact authorities immediately. “If you do not do these things, you risk legal issues,” Dollar said.