1. Foreclosure Scams and Fraud, and Loan Mods Oregon Department of Justice Financial Fraud/Consumer Protection 503 934 4400 www.doj.state.or.us Simon Whang, Asst. Attorney General simon.c.whang@doj.state.or.us jermaine.f.brown@doj.state.or.us

2. DOJ Financial Fraud/Consumer Protection Section Enforces Oregon's Unlawful Trade Practices Act, ORS 646.605 – 646.658. Enforces Oregon's Unlawful Trade Practices Act, ORS 646.605 – 646.658. Consumer education and outreach, hotline Consumer education and outreach, hotline Business activity by Oregon-based company or with Oregon consumer Business activity by Oregon-based company or with Oregon consumer Common UTPA violations: Common UTPA violations: failure to deliver goods/ services or refund money failure to deliver goods/ services or refund money deceptive or misleading advertising deceptive or misleading advertising unconscionable tactics unconscionable tactics misrepresentation of goods/services misrepresentation of goods/services Have consumer file a complaint w/ DOJ. www.doj.state.or.us/finfraud/index.shtml Have consumer file a complaint w/ DOJ. www.doj.state.or.us/finfraud/index.shtml www.doj.state.or.us/finfraud/index.shtml (New feature! Searchable complaint database) (New feature! Searchable complaint database)

3. “Traditional” mortgage fraud Simple: Lie on application to get loan Simple: Lie on application to get loan Complex: Conspiracy among agent, broker, appraiser, straw buyers to over-borrow, avoid repayment, strip equity, manipulate housing prices Complex: Conspiracy among agent, broker, appraiser, straw buyers to over-borrow, avoid repayment, strip equity, manipulate housing prices

4. “New Wave” mortgage fraud Not so many mortgages Not so many mortgages Changes: stricter underwriting standards, unknown pinch-appraiser Changes: stricter underwriting standards, unknown pinch-appraiser Many mortgage brokers left industry Many mortgage brokers left industry Industry shift: foreclosure rescue, loan mods, other products Industry shift: foreclosure rescue, loan mods, other products

5. COMMON “FORECLOSURE RESCUE” SCENARIOS

6. AKA: “Facing foreclosure? Give us your money, and we’ll get you a loan mod.” The Advance Pay Scam

7. “Foreclosure Consultants” 646A.700 Advance fee: violation of law for “foreclosure consultants” to collect money in advance Advance fee: violation of law for “foreclosure consultants” to collect money in advance Other HB 3630 requirements: written contract, refund when requested, explicit disclosures Other HB 3630 requirements: written contract, refund when requested, explicit disclosures Provides UTPA, criminal penalties Provides UTPA, criminal penalties OR-licensed lawyers, mortgage brokers, real estate agents, escrow agents “acting within the scope of license” exempt OR-licensed lawyers, mortgage brokers, real estate agents, escrow agents “acting within the scope of license” exempt

8. Debt Management Service Providers Advance fee prohibition ($50 initial consult) Advance fee prohibition ($50 initial consult) Must get bond Must get bond Must register with Division Finance & Corp Securities Must register with Division Finance & Corp Securities http://dfcs.oregon.gov/debt_mgmt.html http://dfcs.oregon.gov/debt_mgmt.html http://dfcs.oregon.gov/debt_mgmt.html Exemptions: Oregon mortgage brokers or OR lawyers acting “incidental to practice of law” Exemptions: Oregon mortgage brokers or OR lawyers acting “incidental to practice of law” Third party short sellers NOT exempt Third party short sellers NOT exempt http://www.doj.state.or.us/finfraud/pdf/short_sale_faqs.pdf http://www.doj.state.or.us/finfraud/pdf/short_sale_faqs.pdf

9. “Forensic Loan Analysis”: AKA “We’re really, really, really not offering loan mods. Really.” “Forensic Loan Analysis”: AKA “We’re really, really, really not offering loan mods. Really.” Attempt to avoid state registration, bonding requirements and advance-fee prohibitions Attempt to avoid state registration, bonding requirements and advance-fee prohibitions The product: a review of loan documents for “irregularities”, e.g., RESPA, TILA The product: a review of loan documents for “irregularities”, e.g., RESPA, TILA If an irregularity is found, will refer to someone to do the loan mod. If an irregularity is found, will refer to someone to do the loan mod. How much would you pay for this valuable service? How much would you pay for this valuable service? Possible problems: unconscionable lack of disclosure of services, deceptive advertising Possible problems: unconscionable lack of disclosure of services, deceptive advertising

11. The Lease-Buyback Scam AKA: “Facing foreclosure? Let me hold onto your house for a while.” The Pitch: The Pitch: Homeowner signs over title of house to “White Knight” Homeowner signs over title of house to “White Knight” W.K. responsible for mortgage payments, tenant pays rent to W.K. W.K. responsible for mortgage payments, tenant pays rent to W.K. Tenant has option to buy back property in X years after credit or financial situation improves Tenant has option to buy back property in X years after credit or financial situation improves Benefit to homeowner? Stays in home, “retains” home, no foreclosure, hope. Benefit to homeowner? Stays in home, “retains” home, no foreclosure, hope.

12. The Lease-Buyback Scam The Problem: The Problem: Rent payments may be as onerous as mortgage payments. Late payment = eviction = loss of home. Rent payments may be as onerous as mortgage payments. Late payment = eviction = loss of home. Passing on of costs, sometimes hidden, e.g., insurance, taxes, maintenance/repairs Passing on of costs, sometimes hidden, e.g., insurance, taxes, maintenance/repairs W.K. blocks the option: homeowner “fails to qualify for credit” W.K. blocks the option: homeowner “fails to qualify for credit” The Scam : The Scam : equity strip (re-fi, 2 nd mortgage) equity strip (re-fi, 2 nd mortgage) sometimes out-and-out theft (W.K. collects rents, doesn’t pay mortgage) sometimes out-and-out theft (W.K. collects rents, doesn’t pay mortgage) Homeowner loses home, may still get foreclosure Homeowner loses home, may still get foreclosure

13. Short Sale Issues #1 Question by Real Estate Brokers: Can I negotiate a short sale on behalf of my client? A: Depends. Make sure to fully disclose to all parties, seek proper legal advice, not violate real estate regs or other laws A: Depends. Make sure to fully disclose to all parties, seek proper legal advice, not violate real estate regs or other laws Problems with Short Sales: Problems with Short Sales: Third-party short sales: illegal collection of fees, unauthorized practice of law, unlicensed real estate activity Third-party short sales: illegal collection of fees, unauthorized practice of law, unlicensed real estate activity RESPA or violations for failing to disclose fee RESPA or violations for failing to disclose fee Straw buyer, property transfer situations Straw buyer, property transfer situations

14. Robo-signing, MERS, “Find-the-Note” We seen a rise in Media and Internet reports of flaws in the foreclosure process. Here’s what’s described: Robosigners. Improper affidavits by bank employees who do not read or know what they sign Robosigners. Improper affidavits by bank employees who do not read or know what they sign MERS. Mortgage Electronic Registration System is not a proper party in foreclosure. MERS. Mortgage Electronic Registration System is not a proper party in foreclosure. Find-the-Note. Bank cannot produce the note on the house, so it can’t foreclose. Find-the-Note. Bank cannot produce the note on the house, so it can’t foreclose.Problem? Not settled law. These foreclosure “defenses” are not guaranteed to succeed, and success only delays, not stops, foreclosure. Not settled law. These foreclosure “defenses” are not guaranteed to succeed, and success only delays, not stops, foreclosure. Scammers promising results will take your money, but will not produce results. Scammers promising results will take your money, but will not produce results. Time towards these defenses may make your situation worse. Time towards these defenses may make your situation worse.

15. Senate Bill 628, (and 3130) Homeowner has right to Loan Modification “Meeting” upon Notice of Foreclosure Homeowner has right to Loan Modification “Meeting” upon Notice of Foreclosure Homeowner MUST return form asking for Loan Modification Meeting—even if already in loan mod consideration Homeowner MUST return form asking for Loan Modification Meeting—even if already in loan mod consideration Trustee must file Affidavit of Compliance with County Recorder 5 days prior to sale Trustee must file Affidavit of Compliance with County Recorder 5 days prior to sale (No enforcement mechanism) (No enforcement mechanism)

16. My Bank Won’t Listen! Banks won’t help homeowners with Loan Modifications Losing documents Losing documents Temporarily mod won’t convert to permanent mod Temporarily mod won’t convert to permanent mod Foreclosing during open loan modification consideration Foreclosing during open loan modification consideration Giving conflicting information Giving conflicting information No response No response When dealing with a bank, always: When dealing with a bank, always: Keep precise records of Who you spoke with, When you talked, Keep precise records of Who you spoke with, When you talked, What was said Never send originals, always keep copies Never send originals, always keep copies Be persistent Be persistent Point out specific regulations/laws violated Point out specific regulations/laws violated Use Escalation Contacts: HAMP, the Bank itself, Freddie/Fannie. File complaint with DOJ, DOJ has bank escalation contacts. Use Escalation Contacts: HAMP, the Bank itself, Freddie/Fannie. File complaint with DOJ, DOJ has bank escalation contacts. General Foreclosure info: http://foreclosurehelp.oregon.gov/ General Foreclosure info: http://foreclosurehelp.oregon.gov/ Use Qualified Written Request for information. Use Qualified Written Request for information. http://www.hud.gov/offices/hsg/ramh/res/reslettr.cfm http://www.hud.gov/offices/hsg/ramh/res/reslettr.cfm

17. File a Complaint Oregon Department of Justice Oregon Department of Justice Hotline: 877 877 9392 Hotline: 877 877 9392 www.doj.state.or.us www.doj.state.or.us www.doj.state.or.us Division of Finance and Corporate Securities Division of Finance and Corporate Securities 350 Winter St. NE, Rm. 410 Salem, OR 97301-3881 Phone: 503-378-4140 or 503-378-4387 http://www.cbs.state.or.us/dfcs/