Foreclosure Epidemic Infecting Rental Market
Tenants, Lenders Are Exposed to Various Scams

By Nick Miroff
Washington Post Staff Writer
Tuesday, December 9, 2008

Of all the things that can go wrong on moving day, few could be worse than arriving at your new home to find another family already living there. Then again, in today's Darwinian housing market, worse things do indeed occur.

Like when a devious foreclosure agent tried to trick a Fairfax County teenager into handing over her family's house keys. Or when a "landlord" collecting security deposits and rent turned out to be an impostor with no legal claim to the property whatsoever.

In the past 18 months, the foreclosure debacle has pushed tens of thousands of area residents into the rental market, many with crippled credit and a desperate need for housing. Waiting for them is a new cast of swindlers, cheats and real estate sharks ready to prey on the weak and needy. Scams of various stripes are thriving in the foreclosure mess and flourishing at the margins of landlord-tenant laws.

Rental scams have generally been more of an urban problem, but the high incidence of foreclosure in the Washington region's suburbs and the relative lack of tenants' rights organizations there have helped create areas of vulnerability in such places as Prince William County. Opportunities are rife: The county and the adjacent cities of Manassas and Manassas Park have tallied 7,672 foreclosures this year through November, according to court records, up from 3,344 in 2007 and 282 the year before.

Many of those homes are bank-owned and vacant, and investors have been buying them at deep discounts and converting them into rental properties. But houses that remain vacant present some of the ripest targets for fraud, officials said.

Some of the schemes are astoundingly brazen. In July, Fairfax County police arrested Fauquier County resident Richard Hiner and accused him of breaking into empty, bank-owned homes, changing the locks and posting them as rentals on Craigslist. He accepted payment on nine properties, police said, including one he "rented" to two families that tried to move in on the same day.

When he was caught, Hiner still had the real estate signs from the homes in the back of his truck, police said. Evidence indicated that he was working for a larger, out-of-state criminal enterprise, but the trail went cold after police traced Web records to Africa, Seattle and elsewhere.

Hiner, 31, has been convicted of three felony counts of obtaining money under false pretenses. Sentencing is scheduled for Dec. 19.

"If you go on Craigslist, you can pick out the scams," said Lt. Michael Proffitt of the Fairfax County police. "If you look at one that says, 'No credit checks,' that's a clue. Or a price that's a lot lower than others in the area. Or multiple ads with the same phone number, and when you call, the person is in New York or Maine or Puerto Rico."

Most scams are less audacious. The most common involve landlords who collect rent but fail to pay the mortgage, leaving a rude surprise for the tenant when the sheriff shows up with eviction orders. Because it can take months for banks to initiate the eviction process, some landlords are cashing rent checks well after they have lost legal possession of the property.

"The owner asked us to pay October rent even though she lost the house in September," said Silvana Cuello, a Uruguayan immigrant and mother of three whose husband, a construction worker, is out of work and recovering from knee surgery. In October, a property management crew from the bank showed up at the family's house in Clifton, expecting it to be vacant, and now Cuello is working with a lawyer to delay eviction until she can find a place nearby so her children won't have to change schools.

"We've lived here for four years," she said.

Collecting money on a property you no longer own or signing a long-term lease on a property headed for foreclosure could lead to felony charges of obtaining money under false pretenses, authorities said.

"As opportunities arise, the scoundrels and the con men come out," said Doyle Niemann, an assistant state's attorney in Prince George's County. "A landlord who continues to collect money after [foreclosure] would be guilty of theft," he said.

But experts say tenants' rights are limited in the foreclosure process. Although laws in the District protect renters from eviction if they have a valid lease, tenants in Virginia and Maryland lack the right to remain in a repossessed home, attorneys said.

"There are no protections for tenants" in Virginia, said Kristi Cahoon, an attorney with Northern Virginia Legal Services in Fairfax County. In the commonwealth, as in Maryland, "a lease does not survive a foreclosure sale."

Furthermore, there is little recourse for tenants whose landlords stop paying the mortgage and don't tell them about it.

"The lease agreement is between the tenant and the landlord, and the tenant doesn't have any say with what the landlord does with that money," said Vee Johnson, an official with Fairfax County's Consumer Protection Branch.

Foreclosure agents acting on behalf of banks will try various strategies to persuade tenants to move out. Some involve cash incentives, but others are less-than-honest tactics verging on intimidation. "There are no rules in place, so a lot of things are being created on a day-to-day basis," Johnson said.

Centreville resident Leticia Willcockson said her 13-year-old daughter recently came home from school to find a foreclosure agent on the doorstep. The agent told the girl that her family had to move out and then asked the frightened teen for her key, Willcockson said.

Because Willcockson had paid the rent through the end of the year and could find no record that the home she was renting was in foreclosure, she refused to leave. Her landlord insists that the house is not in foreclosure, Willcockson said, but as the agent continues calling her, she has grown increasingly frightened and confused.

In one voice mail message, the agent tells Willcockson to leave the house or risk losing her belongings -- a threat with no legal basis.

"I don't want her to lock us out and take our stuff," said Willcockson, crying. "I've paid every dime I have toward our rent."

When asked about the behavior of his foreclosure agent, Avery Hess real estate executive David Hess said that the company would investigate Willcockson's case and that the company would not do anything illegal, such as seizing a tenant's property without proper notification. "There would be severe consequences for an illegal eviction," he said.

In recent months, Cahoon, the Legal Services attorney, said her office has been swamped with so many calls about rip-offs and scams, "they doesn't even faze me anymore." Police in the region do not specifically track fraud or theft cases that stem from rental housing, so the trend is difficult to chart.

Still, the problem is concentrated in immigrant communities, where victims are often unaware of their rights and too fearful of the authorities to report crimes, advocates said. "People claiming to be representatives of banks will bang on doors at 11 p.m. at night, demanding that tenants leave immediately. If they're [illegal] immigrants, they'll threaten to have them thrown in jail," Cahoon said. "It's getting really depressing."

Tenants with damaged credit are especially vulnerable. Landlords who advertise "no credit check" might demand large upfront payments in return.

When Fairfax County resident Deborah Leggett began searching for a place that would accept her Section 8 federal housing voucher, she said, some landlords asked for huge sums in advance. A former mortgage underwriter who is now disabled, Leggett said she double-checked landlords' names against property records and repeatedly found disparities.

"I'm suspicious of the majority of people who respond to me off Craigslist," Leggett said. As a strategy, she began asking for a letter from landlords' lenders stating that their mortgages were in good standing. "If you have a right to investigate me as a tenant, I have a right to investigate you as a landlord," she said.

Most of them balked, but Leggett eventually found a place to live, one owned by a property management company, not an individual.

Prince William County police spokeswoman Erika Hernandez said there are several things prospective tenants can do to protect themselves, including checking property records and looking in the phone book to confirm whether the real estate agent works at an established business.

"Try to get as much information as you can," Hernandez said. "If you go to a house and the Realtor shows up in a car, write down their tags and the type of car they were driving."

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