New York City Real Estate Fraud Attorney

In New York State, thousands of homeowners have been victimized by loan modification companies, “foreclosure specialists,” investors, and loan auditors who falsely claim to be experts and guarantee to save a person’s home. It is therefore imperative that homeowners learn to distinguish between the many home foreclosure rescue scams and legitimate, experienced attorneys well versed in the various applicable legal strategies to save a homeowner’s distressed property.

Self-proclaimed experts claim to possess unique knowledge and skill that’s beyond the comprehension of attorneys and judges that practice foreclosure law daily in courts throughout New York State. By promising “free and clear title,” mandatory principal reductions and even criminal prosecution of bank officials, these con artists manipulate vulnerable homeowners to seize control of their home. Inevitably, the victimized homeowner loses thousands of dollars and the loss of his home. The following is a description of the most common home rescue scams.

Loan Modification Company Scam

It is a violation of New York State & Federal laws for any non-attorney or an attorney not licensed in New York State to collect an upfront fee to provide “mortgage assistance relief services,” and/or “distressed property consulting services” (i.e. loan modification, forensic audit, loss mitigation) to a distressed New York State homeowner, as such are defined & outlined in New York Real Property Law § 265-b (“NYRPL § 265-b”) and 16 CFR Part 322 (“MARS Ruling”).

These Federal and State laws were enacted as a response to the widespread consumer complaints filed by distressed property homeowners whom were preyed upon and victimized by unscrupulous individuals and companies that charged hefty up-front fees for bogus loan modification services. Loan modification scam companies charge a monthly fee in perpetuity but don’t conduct any work or provide legal services. Instead of obtaining a loan modification, victimized homeowners oftentimes lose thousands of dollars and suffer the loss of their home.

Distressed homeowners should consider consulting directly with an attorney licensed in the state where their property is located and whom specializes in foreclosure defense and loss mitigation to help obtain a loan modification.

Forensic Loan and Securitization Audit Scam

Many companies claim that for a small cost they’ll provide a Forensic Loan Audit (“FLA”) or Mortgage Securitization Analysis (“MSA”) that would uncover an array of illegalities in a homeowner’s loan documents (i.e. the Mortgage and Note). These scammers claim their FLA and/or MSA would force a homeowner’s lender to either void the mortgage or force them to give a distressed homeowner a significant principal reduction and loan modification. Not only are these claims false, but an individual or company soliciting FLA’s or MSA’s for a fee is in direct violation of federal law (i.e. MARS Ruling). Significantly, both Federal and State courts have consistently ruled that a homeowner lacks standing to file a claim based on the MSA because a homeowner lacks privity of contract and is not a participant in the securitization chain of their loan. If necessary, MSA’s and FLA’s should only be provided by a competent foreclosure defense attorney as a part of the representation of a distressed homeowner. Failure to retain an experienced foreclosure defense attorney to assess the necessity of an MSA or FLA will typically render them useless and a waste of thousands of dollars.

Mortgage Elimination Scam “Free and Clear title.”

Often referred to as “free and clear title,” scammers solicit distressed property homeowners by alleging that their mortgage debt can be eliminated through the implementation and usage of the scammers’ highly technical skill and specialized legal documents.

The organizers of this scam compile a wide assortment of irrelevant, quasi-legal, template documents and advance baseless, frivolous claims that the bank’s misconduct somehow warrants the elimination of a homeowner’s mortgage. Scammers claim that the bank’s non-responsiveness to their series of mailings and recordings within a certain period warrants the automatic cancelation of a homeowner’s mortgage. Although manifested in many different forms, all mortgage elimination schemes charge their victims thousands of dollars for assisting them in constructing and mailing the bogus legal forms, which usually cite obscure passages from government publications, statements by politicians, constitutional provisions, court decisions, and various statutes. However, not a sole mortgage has ever been voided based upon the tactics used in mortgage elimination “free and clear title,” scams. Many homeowners victimized by free and clear title scammers have lost tens of thousands of dollars and the homes they desperately tried to save.

Deed Scam

This scam has many different forms but they typically all conclude with a distressed homeowner signing over the deed to his/her property. As reflected by the New York State Department of Financial Services, these scammers try to convince a homeowner that they want to “rescue” a homeowner from foreclosure and offer the homeowner several fraudulent “solutions”, including:

  • Buying a homeowner’s home to enable the homeowner to pay off their mortgage and rent the house at a low monthly rate until the homeowner can afford to buy back their home;
  • Paying a homeowner’s mortgage in exchange for temporarily holding the deed to their home, allowing the homeowner to live in the home as a renter, at a low rent, until the homeowner can afford the mortgage payments again;
  • Asking the homeowner to put the deed to their house in another person’s (because the new person has better credit than the homeowner) so that the scammer can obtain new and affordable mortgage for the homeowner;
  • Making a low-cost loan to a homeowner so that the homeowner can pay off a portion or all their mortgage, and then pay back the scammer, who holds the deed to the house as collateral; and
  • Offering to negotiate on the homeowner’s behalf with homeowner’s lenders for reduced interest rates and debt forgiveness.
  • Once the homeowner agrees to one of these “solutions”, the scammer then steals the homeowner’s home or their equity by using deceptive practices such as:
  • Convincing the homeowner to sign a contract that seems to be for the legitimate sale of homeowner’s home to the scammer, but just gives over homeowner’s home’s deed to the scammer with no requirement for any payment to homeowner;
  • Convincing the homeowner to sign a contract with a one-sided buyback agreement that states the homeowner must pay an enormous repurchase fee to the scammer and/or the home must be repurchased within a very short time. Both requirements are impossible for the homemaker to attain and the home is inevitably lost to the scammer;
  • Charging the homeowner extremely high interest rates and fees on what was promised to be a “low-cost” loan with which the homeowner could pay off their homeowner’s mortgage, and then taking the deed to the homeowner’s home when homeowner default on that loan;
  • Buying the homeowner’s home then charging the homeowner numerous exorbitant hidden fees that absorb all the proceeds of the sale;
  • Charging the homeowner huge fees for “negotiating work” with the lender that was either never done, or that homeowner could have done;
  • Lying to the homeowner about the length of time the homeowner has before the house is scheduled to be sold at a foreclosure auction, pressuring the homeowner to sign documents quickly and without reading them; and refusing to allow the homeowner to speak to their lender or lawyer.

Ultimately, the scammer has either bought the homeowner’s home for a fraction of its actual value or has stolen the deed to the homeowner’s home without receiving any money. The homeowner is now left homeless but still responsible for the mortgage and currently still in foreclosure. In cases where the homeowner retains ownership of his home, the new terms, fees and interest associated with his new mortgage renders it unaffordable and will eventually lose his property in foreclosure to the same individual who offered assistance.

To protect vulnerable homeowners in default New York State has enacted the Home Equity Theft Prevention Act (“HEPTA”) NY RPL §265-a, signed into law in New York State on July 26, 2006, and became effective on February 1, 2007. HEPTA was enacted to protect vulnerable homeowners who are in default on their mortgages or facing foreclosure from fraud, deception and unfair dealing. The purpose of HEPTA is to preserve and guard the precious asset of home equity, and to provide homeowners with information they need to make an informed and intelligent decision regarding the sale or transfer of their home to an “equity purchaser.”

HETPA generally applies to the sale of a home in a residential foreclosure or default to a buyer who wants to purchase the home as an investment. A home is in default if the homeowner is at least two months behind in mortgage payments. HEPTA requires that agreements be in writing, in English and Spanish if that is the homeowner’s primary language, signed and dated, incorporates language regarding a homeowner’s five day “right to cancel,” and additional disclosures and protections. Homeowner’s have a right to a completed and detailed contract that includes the total amount given by purchaser, date that physical possession of property is to be transferred, terms of rental or lease agreement and terms of any buyback or reconveyance agreement. HEPTA protections cannot be waived.

Any violation of HEPTA allows the homeowner to rescind the transaction within two years of recording the conveyance and bring an action for the recovery of damages or equitable relief (up to three times the actual damages) within six years from the date of the transaction. A court may award actual damages plus reasonable attorneys fees and costs.

A violation of HEPTA is also a criminal offense designated a Class E felony punishable by a term of imprisonment and fine of not more than $25,000. Please click on any of the below-listed links for further information provided by State and Federal governmental agencies regarding foreclosure and home rescue scams.

Mass Joinder Lawsuit Scam

This scam involves a network of individuals and/or companies that provide advertising and marketing services on behalf of a law firm which solicits distressed homeowners to participate in a class action lawsuit against various lenders and mortgage companies that purportedly engaged in fraud and illegal conduct. Many distressed homeowners are aware of the numerous multibillion-dollar settlements agreed to by large banks and lending institutions. As a result, many homeowners instinctively believe that they too have been victimized by a lender or loan servicer and have a legal claim to recover a large sum of money. Though such inherent beliefs are false, these scammers seize upon a homeowner’s vulnerabilities and sway their participation in a mass joinder class action lawsuit. Eligibility to join and become a class member is based upon payment of a “consultation fee,” typically in the amount of several thousand dollars. However, few mass joinder law suits have been filed in a court of law, and even less have been properly pled and successfully litigated. For more information regarding homeowner rescue scams please see the links below or contact our firm to schedule a consultation.

Federal Trade Commission
United States Department of Justice
New York State Office of the Attorney General
New York State Department of Financial Services

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