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Anti-Scam Message Hits YouTube

Freddie Mac made its video after it found that a quarter of delinquent borrowers go online for help before contacting their lenders.
Freddie Mac made its video after it found that a quarter of delinquent borrowers go online for help before contacting their lenders. (Freddie Mac Via Youtube)

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By Michelle Singletary
Sunday, December 16, 2007

Freddie Mac is hoping YouTube can help prevent troubled borrowers from losing their homes, or at least help them preserve their equity.

The McLean company, one of the nation's largest investors in residential mortgages, has produced a two-minute video and posted it on the popular Internet site -- at http://www.youtube.com/avoidfraud. The company said it wanted to try a different way to reach homeowners.

Freddie Mac developed the idea after a survey found that one in four delinquent borrowers searches the Internet before contacting his bank or lender to find out how to avoid losing his home.

Such searches can send people right into the hands of someone with the sole mission of stealing the equity they have in their homes. Although home values have fallen in many areas of the country, many financially strapped borrowers still have equity. It's that money these fraudsters are after.

"When you have an increasing population of delinquent and frightened borrowers, it's like a dinner bell for scam artists," said Brad German, director of public relations for Freddie Mac.

The prevalence of foreclosure scams across the country is a troubling trend, said Robb Hagberg, manager of fraud investigations for Freddie Mac.

Hagberg said a large fraud case discovered in Boston involves a group of homeowners targeted by a mortgage broker, who shared an ethnic connection with his victims. Because the case is still under investigation, Hagberg couldn't release any specifics. But he shared a broad outline of how one woman became a target.

The homeowner fell behind in her mortgage payments. The outstanding balance on her mortgage was $180,000. Her house had a market value of $300,000.

The woman was contacted by the broker. Because this man shared a common heritage and found her through community connections, the homeowner trusted him. The broker promised the woman that he would help her secure new financing and avoid foreclosure. Instead, Hagberg said, he conned her in an elaborate "equity stripping" scheme that involved multiple loans.

Equity stripping occurs when a con artist elicits the help of a straw buyer to purchase a home. Either working in concert or without the knowledge of the straw buyer, the fraudster gets the homeowner to sign over the title to the buyer, who takes out a loan for 100 percent of the value of the home. In the case of the Boston woman, she thought she was signing paperwork that would allow her to rent the home with the option to buy it back at a future time.

After closing costs, fees and past-due mortgage payments were paid, the amount of equity left was $100,000. Possibly with the help of the settlement attorney, a check for the $100,000 was illegally made out not to the straw buyer but to the broker, Hagberg said.

Amazingly and brazenly, the alleged con didn't end there. The straw buyer didn't make the mortgage payments. To avoid having the home foreclosed on, the broker recruited a second buyer to purchase it from the first straw buyer. A second appraisal, which Hagberg said may have been inflated, showed that the home had increased in value to $415,000. After a second closing with the second straw buyer, the broker walked off with another check for $110,000 of equity from the same property, Hagberg said. The original homeowner was unaware of the second purchase and that the mortgage payments were not being made.


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© 2007 The Washington Post Company

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