Scam Cheats Borrowers Out of Loan Payments

June 20, 2011

Warn your home owner clients to beware of a scam growing in many parts the country that tries to trick home owners out of a month or two of their mortgage payments.

The Chicago Tribune referred to it as the “handoff rip-off” scheme, in which scammers send letters to borrowers informing them that a new company has assumed the management of their loans and to start making mortgage payments to the new company.

Many home owners aren’t familiar with the rules when it comes to the transfer of mortgage-servicing so they follow the letter's directions in sending their payments to the new company and could possibly lose thousands in mortgage payments.

Inform your home owner clients of mortgage-servicing transfer rules so they won’t be duped. For example, the law requires a company that provides a mortgage on behalf of the loan’s owner to send a "goodbye" letter notifying them that at a specific date their payment should be sent to a new company. Then, a week or so later, the home owner is legally to receive a second letter from the new servicer that provides mortgage payment information (their principal, interest, and escrow). Both letters should include the home owner's loan number, the Tribune article explains.

When in doubt, contact your original servicer to find out if the letter received is legit or fraud.

The scheme "works for maybe two months" because that is usually how long it takes for borrowers to realize they've been tricked, says Becky Walzak, a loan-quality assurance expert. "But if the bad guys are any good, they've taken in thousands of payments from thousands of people. They cash them, and they move on to the next batch of borrowers."

Source: “Home Owners, Beware of ‘Handoff Rip-Off’ Scheme,”Chicago Tribune (June 19, 2011)