HAMP Loan Modifications – Preventing Foreclosures, Or Causing Them?

As I once heard brilliant financial guru Steve Forbes say (paraphrase) “. . . we had a chance to fix the mortgage crisis back in ’07;  if we had just let it crash, it would have been painful, but we would have recovered in 6 months.”  A free economy tends to correct itself, but it’s just not the nature of government(s) to leave things alone.  That’s why we have to endure this mess for years instead of months, and why we have new government programs every time another one fails.  Whatever it takes to prevent economy from it’s natural course: stretch the band, kick the can down the road, etc.

Since 2008, when foreclosures finally got the nation’s attention, congress and the administration has been trying everything they can think of to keep the economy off its inevitable course.  So every few months we get another program:  TARP, Cash-For-Clunkers, HAFA, etc.  Not only are none of these programs working, they seem to be making the problem worse, and like all government programs are easy targets for fraud.

It gets even more frightening when you can’t tell if the fraud is intentional.  Case in point is HAMP, the Home Affordable Modification Program.  The evidence is pretty clear that one way or another, most loan mods fail.  So along comes the government (again) with another program trying to revive a dead animal.  Is it intended to assist borrowers, or abuse them?

“What people entering the HAMP modification process don’t understand, until they are out on the street, is that it wasn’t designed to limit foreclosures; it was intended to expedite them”  (Geroge W. Mantor, RISMedia 8/17/2010).

Sound incredible?  Check out these two links:

(1)  More And Better Predatory Loan Servicing Fraud.

(2)  Are Loan Modifications Causing Foreclosures?

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Homebuyer Tax Credit For Inmates Serving Life Sentences

Remember the First-Time Homebuyer Tax Credit?   It was perhaps the only effective or successful federal economic program in the past five+ years.  Well, Even those rare government programs that actually work are fraught with fraud.  Go figure.

As early as last October, there were reports of fraud schemes and suspicious claims as the tax credit was set to expire and was being considered for extension (see DSNews 10/20/09).   That’s not so surprising, I guess.

What’s shocking is the recent report that prison inmates were able “to apply for and receive $9.1 million in homebuyer tax credits” (see DSNews 6/24/10).  This article refers to a Treasury audit report that further shows that 241 inmates serving life sentences received a combined $1.7 million in tax credits.

This sort of begs the question: what kind of income tax liability can you earn serving a life sentence behind bars?  Is there even any point in a federal tax credit?

"Two men looked out from prison bars, one...
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The same Treasury audit also indicates that $17.6 million in claims were allowed for homes purchased before the tax credit program.  It gets better, though, with the reports of post-refund claims resulting in investigation, $785 million, or post-refund claims resulting in denial, $438 million.  The IRS seems to be catching a whole lot more fraud than they miss, but still . . .

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Beware The Craigslist Rent Scam

Regretfully, all is not what it seems on CraigslistOn a recent REO listing we received numerous calls inquiring whether the property was for rent or for sale.   Shortly after we posted the home on the multiple listing service someone posted a Craigslist ad offering the property for rent at a ridiculously low price.  The ad actually copied our MLS headline and verbiage word-for-word.  This was an upscale property in remarkably good condition for an REO.  We expected a lot of inquiries, but not from renters.

Some of the callers had driven by the property, noticed our lawn sign, figured the spoof and called to tip us off.  One of the parties answered the ad and received a response from an “absentee owner” with elaborate instructions regarding deposit, credit check, keys, etc.

This isn’t the first time someone rent-spoofed one of our REO listings. The last time we got tipped off, one of my staff posed as a prospective renter and carried on a clever reverse spoof with the scammer by email. She filled out a long application under a celebrity name, answered by a request for a photo.  She sent a photo of another celebrity, answered by a request for a money order for the deposit.   The scammer explained how they really wanted someone who would take good care of their home while they were overseas, how they would take time out of their busy schedule to fly home and deliver the keys once the deposit had cleared.

Game on. The scammer fell for the spoof, apparently not picking up on the celebrity name or photo.  This is where it got interesting.  My assistant crafted a passable, but obviously mocked-up money order and sent it.  After a couple of days, the scammer responded furiously, all upset that the money order was a fake, going on and on about how someone would take advantage of him that way. Finally I weighed in and emailed the fellow explaining the spoof, how much fun we had, and the implications of the fraud he was attempting.  He wrote me back telling me to “go and die.”

Although we’ve been tipped off to only a couple of instances over the last three years, it’s probable that this goes on all the time. The sad part is, like all internet scams, they must work sometimes.  If people didn’t fall for them, they would stop.  Beware the Craigslist rent scam, and warn everybody you know:  don’t pay for anything you can’t verify! If you are even slightly suspicious, consult a professional.

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