Saturday, December 19, 2009

Robert Shumake Suggests More Programs to Help Stop Foreclosure

Foreclosures lead to vacant homes which become eye-sores in neighborhoods. It's senseless; we need more programs to help people stay in their homes. Modifying loans is in the best interest of all concerned. When lenders take the home, they lose even more because they are unable to sell it.

Program to renegotiate Burlington home mortgages

By Cynthia Burton

Inquirer Staff Writer

As foreclosure rates in New Jersey break records, one area community is trying a new program to keep people in their homes.

Burlington City, a town of 9,000 people on the Delaware River, is working with a $25 million investment fund that plans to buy up mortgages in danger of collapse. Fund managers plan to become the lender and work out deals with distressed homeowners, according to DeForest "Buster" Soaries, who heads the Central Jersey Community Development Corp. in Somerset, which is running the program in New Jersey.

Ultimately, Soaries hopes to raise as much as $400 million and expand the program into other communities. For now, it will be available to a total of about 625 families in Burlington City, Woodbridge, Trenton, New Brunswick, Franklin (Somerset County), Plainfield, Old Bridge, and Plainsboro.

Burlington Mayor James Fazzone is stitching Soaries' program into an overall plan to spruce up the town - the birthplace of James Fenimore Cooper, a stop on the Underground Railroad, and a rumored burial place of Blackbeard's treasure.

With the rich history of this town, which once manufactured rickshaws and rowboats, comes aged and obsolete housing stock. More than 70 percent of its 4,100 housing units were built before 1960, and most of those before 1939, according to census figures.

The town has demolished some of its wooden twin houses, hoping to make way for sturdier ones. It has renovated the old Lyceum Hall into a cultural and community center where, among other things, Burlington Community College will offer several basic courses. In neighborhoods, Fazzone would target specific blocks for mortgage help and renovations where needed. The city would demolish houses too far gone to be fixed up.

Fazzone is concerned, though, that redevelopment efforts could displace residents, and that's where the new mortgage program comes in.

"I think a neighborhood is the people," he said.

Like people across the state, many in Burlington City are just a layoff or an illness away from getting behind on their mortgages.

"If people don't have jobs, they're three months away from losing their home. They don't have a lot of money in the bank," Fazzone said. "Disaster is just around the corner."

He's hoping to help people before they get into too much trouble.
Soaries said he could begin buying mortgages and start negotiating with homeowners early next year. Many details of the program have yet to be worked out, including exactly when it would start and how many families would be helped. He hopes to expand the program rapidly from its first $25 million to $400 million sometime in 2010.
Frustrated with mortgage foreclosure programs, which he said were barely scratching the surface of the problem, Soaries formed a partnership with Atlanta-based APD Solutions to get the investment capital needed for the mortgage purchase program.
With that money, he said, he would "open a window of a world that is flying below the radar." It is a world where mortgage holders bundle nonperforming loans and sell them for pennies on the dollar.

Mortgage buyers typically seek big profits, often trying to extract the full loan price from a homeowner. Soaries would buy the discounted mortgage and then negotiate a new mortgage with the distressed homeowner, hoping to make a modest return on the investment and helping the homeowner secure an affordable mortgage.

If a family can't afford to pay a mortgage, he said, he would connect it to jobs, treatment centers, or possibly new housing.

"We will deal with family recovery - not just mortgage recovery," said Soaries, who served as secretary of state under Gov. Christie Whitman.

New Jersey ranked fifth in the nation in the percentage of mortgages in some stage of foreclosure in the third quarter of this year, according to figures from the Mortgage Bankers Association, a trade group.

The state already has broken last year's record of 51,623 foreclosures, according to figures compiled by the Administrative Office of the Courts. By the end of October, the state had reported 56,387 foreclosures.

High-priced mortgages with big balloon payments and adjustable interest rates given to people without the money to pay them back are a root cause of the nation's financial crisis. But now, experts say people who have seen income cuts because they lost their jobs or suffered another financial setback are joining the ranks of people whose homes are in foreclosure.

"The foreclosure problem is getting worse, not better," said Soaries. "We're trying to get ahead of the crisis."
Contact staff writer Cynthia Burton at 856-779-3858 or

Real Estate License Q&A Provided by Robert Shumake

Here is something I found on the State of Michigan's website about real estate licensing requirements.

Frequently Asked Questions - Legal Issues

Is a real estate license required to auction real property for others for a fee?
A real estate license is not required for individuals who hold auctions of real property. A person conducting an auction of real estate may promote, advertise and conduct it ("call the sale") to determine a selling price. The closing of the sale after the "pounding of the gavel" (to signify the close of the auction) must be handled by a licensed Michigan real estate broker or an attorney. Many various types of auctions are conducted and persons engaging in purchasing at auction are encouraged to read the materials thoroughly and understand the process before engaging in bidding. There may be local governmental regulations, e.g., county, city, township, that require an auctioneer to secure a permit or registration.

Also, in Michigan if a person wishes to call themselves a "registered auctioneer" and hold themselves out to the public as being registered that person must meet the requirements of Article 29 of the Occupational Code. Applications for registration as an auctioneer are processed through the Department of Energy, Labor and Economic Growth, Bureau of Commercial Services, Licensing Division, and additional information can be obtained at:

I' m setting up a broker website. Are there Internet advertising guidelines?

At the present time, the only advertising guidelines are the general ones at Rule 329. If you advertise, you must include the broker's name as licensed, and the broker's telephone number or street address. All advertising shall indicate affirmatively that the party advertising is a real estate broker, as well as not violate generally prohibited acts such as misrepresentation, fraud, deceit or dishonesty found in 339.604 of the Occupational Code

I would like to buy and sell businesses on the behalf of others. Is a license required for this?

Brokering - the sale of a business, business opportunity or goodwill of an existing business that includes an interest in real estate, for others for a fee, is included in the definition of real estate broker and real estate salesperson and would require a license. See the definitions in 339.2501 of the Occupational Code. You can also bring up the licensing requirements for both salespersons and brokers. A Michigan Supreme Court Opinion states that a real estate license is not required if the exchange of the business does not include an interest in real estate. Please see the opinion at

Do I have to have a license to do property management?

"Property Management" is defined by the Occupational Code to include " . . . the leasing or renting, or the offering to lease or rent, of real property of others for a fee, commission, compensation or other valuable consideration pursuant to a property management employment contract." It is an activity that requires a real estate broker's license. Salespersons can also perform property management but all activities would be in the name of and under the supervision of the salesperson's broker. No license is required if you own the property being managed, or are a direct employee acting on behalf of the property owner. Also, if your activities are limited to such areas as property upkeep or bookkeeping functions, and do not include leasing or renting of the property, you would not fit the definition of property management and would not be required to have a real estate license.

What are the licensing requirements to work as a salesperson for a residential builder?

A residential builder salesperson, or a residential maintenance and alteration (M&A) contractor salesperson is not the same as being a real estate salesperson. Those licenses are issued through the Residential Builder and Maintenance & Alteration Contractors Board. A licensed real estate salesperson does not sell for a residential builder or M&A contractor unless the builder or M&A contractor has listed the property with the real estate salesperson's real estate broker.

You can read about Residential Builder and Residential Maintenance & Alteration Contractor licensing by going to their website or by calling 517-373-8376.

As a licensed real estate salesperson, am I allowed to perform a "broker price opinion"?

Listed below is a quote from Article 26 of the Occupational Code. This article is specific to Real Estate Appraisers, and also has applications to real estate licensees:

Sec. 2601. As used in this article:
(a) "Appraisal" means an opinion, conclusion, or analysis relating to the value of real property but does not include any of the following:
(i) A market analysis performed by a person licensed under article 25 solely for the purpose of assisting a customer or potential customer in determining the potential sale, purchase, or listing price of real property or the rental rate of real property as long as a fee or any other valuable consideration is not charged for that analysis.
(ii) A market analysis of real property for a fee performed by a broker or associate broker licensed under article 25 which does not involve a federally related transaction if the market analysis is put in writing and it states in boldface print, "This is a market analysis, not an appraisal and was prepared by a licensed real estate broker or associate broker, not a licensed appraiser." Failure to do so results in the individual being subject to the penalties set forth in article 6.

A market analysis can be performed by real estate licensees, at no charge, as a regular part of their business to determine a sales price, a buyer's offering price or a rental fee. Brokers and Associate Brokers (but not Salespersons) can perform a price analysis for a fee as long as the required disclosure as shown in paragraph (ii) above is made.

If you have questions regarding Real Estate Appraiser licensing requirements, information is available at their licensing website.

What activities can my assistant, who is not a licensed real estate salesperson, perform?

The Department receives many telephone calls requesting information about real estate-related activities that an unlicensed individual may perform. The following guidelines are presented in an attempt to reduce a broker's exposure to potential risk in the utilization of unlicensed assistants. This information is modeled after an article by Thomas Kotzian JD, former Chairperson of the Michigan Board of Real Estate Brokers and Salespersons, educator and broker, and approved by Ann Millben, Licensing Administrator for Real Estate

Unlicensed Assistants MAY:
-assist licensees during an open house, performing the following functions as a "host" or "hostess"
-open the door and greet prospects as they arrive at the open house
-hand out prepared printed material
-have prospects sign a register (guest book) to record names, addresses and phone numbers for the listing
-accompany prospects through the home for security purposes (only the licensee should answer any questions pertaining to the material aspects of the house or its price and terms)
-perform strictly clerical tasks
-function as a courier in picking up or delivering documents on behalf of the employing licensee [Note: Keys should not be given to unlicensed persons for the purpose of showing a listed property. Brokers are responsible for the properties in their listing inventory and should only give a key to a licensee who is able to show proper I.D. (e.g., valid pocket card and driver's license with photo)]

Unlicensed Assistants MAY NOT:
-independently show or demonstrate property to prospective buyers
-make cold calls by telephone or in person to potential listers, purchasers, tenants or landlords
-answer any questions on title insurance, financing or closings
-independently hold open houses for brokers, or staff booths in home shows or fairs
-solicit business through telephone prospecting
-give additional information not included in prepared written promotional material that has been distributed to the public (e.g., newspaper ads, flyers, brochures)
-represent themselves as an agent for a real estate broker or the owner/seller of property
-have their name printed on business cards or stationery that would imply they are an agent for the real estate broker
-conduct telephone solicitation calls. If John Doe, an unlicensed assistant, calls and indicates he represents ABC Realty, one is led to believe the purpose of the call is to engage in real estate activities. The definition of broker and salesperson in the Code includes one who "lists or attempts to list". Therefore, a call by an unlicensed assistant identifying him or herself as a "representative" of a real estate company is an attempt to list even if specific terms are not discussed at that time.
-Perform any of the acts for which a license is required under Michigan Real Estate License Law. (MCL 339.2501 et seq.)

Licensees who violate state license law by allowing unlicensed assistants to practice real estate on their behalf subject themselves to one or more of the following penalties:

Placement of a limitation on the license
Suspension of license
Denial of license renewal
Revocation of license
A civil fine not to exceed $10,000 per offense
Restitution. (MCL 339.602)
Brokers and managers must also be aware of their liability in allowing licensees to employ unlicensed assistants. Factors such as worker's compensation laws, agency law, income tax reporting and withholding requirements, sexual harassment, employment discrimination and a myriad of state and federal employment statutes must be carefully reviewed when allowing licensees to hire unlicensed assistants.

Brokers are responsible for the acts of their licensed salespersons and associate brokers and "shall not contract with an individual who is licensed to the broker so as to lose the authority to supervise the licensee." (MCL 339.22325) It is therefore the broker's responsibility to supervise all personnel acting under the scope of the broker's authority.

Brokers are advised to consider these issues when writing independent contracts with their salespersons and associate brokers. An attorney who is knowledgeable of employment discrimination and related employment laws should be consulted prior to drafting any independent contract section on this subject. Good research and preparation will avoid many of the problems addressed in this article.

I'm going to have a booth at an upcoming home show being held in my city. I want to ask attendees to drop a card in a fishbowl that I will draw from at the conclusion of the show. Can I give away a television to the winner?

Section 2511(2) of the Occupational Code (MCL 339.2511) allows licensees to hold a game promotion to generally promote their business. There can be no valuable consideration accepted for participating so you cannot "sell" tickets to be eligible to win. Also the promotion cannot be tied to a specific property or properties. Obviously, the licensee must actually award the prize that is promised. Section 2511(2) states that the promotion must comply with section 750.372a of the Michigan penal code.

Can citizens or licensees call the Department requesting legal assistance or interpretations concerning real estate or real property matters?

Real estate licensing unit staff receives many telephone calls from licensees and the public requesting legal advice on real estate matters. The licensing unit does not have in-house legal counsel, nor can legal advise be provided to either licensees or the public. Circumstances that involve the license law and/or rules' statutory provisions or regulations can be discussed. Staff is often asked if an experience someone has with a licensee is in accordance with the statute. Callers are always encouraged to file a complaint if the caller feels that the licensees' actions have resulted in causing them harm. However, staff cannot determine ultimate legal conclusions or give any direction in areas outside the scope of the Occupational Code and Administrative Rules.

Broker's trust account books and records can become a large storage problem. Does the Department see any violation if these records are maintained in a medium other than paper? How long must the trust account records be kept?

Rule 313(3), effective 9-1-03, requires that "all trust or escrow account records shall be maintained for a period of not less than 3 years from the date of inception of the records."

Further, the Code and Rules are silent regarding scanning of those files on to a hard drive, backed up by CD, for future reference, or being stored on microfilm or some other method. Audit Supervisor, Tim Teague, recently confirmed that as long as the records are kept for three years in a manner that can be retrieved, that is acceptable. He further clarified that as long as the scanned images contain all the information that is required (See Rule Section 2512 and Rule 313(4) for a detailed description) the fact that the records are scanned rather than hard-copy or paper makes no difference and would be found acceptable.

Licensees who have questions regarding interpretation of contracts, rental agreements, commission disputes and closings are advised to consult with their employing broker. If legal advice is needed, they should consult an attorney for appropriate action.

Can a lender set up a contest for real estate licensees where the one who provides the lender with the most business wins a trip to Hawaii ?

No. Under RESPA, the trip itself, and even the opportunity to win the trip, would be a thing of value given in exchange for the referral of business.

Can a mortgage banker and a real estate broker advertise their services together, for example, on the same brochure or newspaper advertisement?

Nothing in RESPA prevents joint advertising. However, if one party is paying less than a pro-rata share for the brochure or advertisement, there could be a RESPA violation.

Can a lender give a real estate agent note p ads with the lender's name on it?

Yes. Such note pads with the lender's name on it would be allowable as normal promotional items. However, it the lender gives the real estate agent's name on it for the agent to use to market clients for its real estate business, then the note pads could be a thing of value given for referral of loan business, because it defrays a marketing expense that the real estate agent would otherwise incur.

How should I report a violation of RESPA?

You should send a written complaint describing the practice that you believe violates RESPA. The complaint should include the names, addresses and phone number of the alleged violators. It is preferred that you include your name and phone number in case an investigator wishes to ask further questions. You may request confidentiality. Send the complaint to:

U.S. Department of HUD
Office of RESPA and Interstate Land Sales
451 7th Street SW, Room 9154
Washington DC 20410

Robert Shumake Discusses Real Estate Scams and Victims

The dramatic increase in foreclosures has created an opportunity for scammers who promise to help people save their home from foreclosure. Here is an article about victims of real estae scams:

As foreclosures rise, states struggle to combat mortgage scams

Mortgage scams proliferate as desperate homeowners try to avert foreclosures, pushing state lawmakers into action.

By Lourdes Medrano Contributor / December 2, 2009
Tucson, Ariz.

It was one year ago that home-owner B.L. Davis began to have trouble paying his mortgage.

A medical problem, followed closely by his furnace giving out, depleted his savings and left him unable to pay the $1,900-a-month mortgage on his roomy brick house with a big pool and a neatly landscaped yard.

His answer: a California company that pledged to get his mortgage loan modified. In return, the firm wanted nearly $2,000 upfront, and a seemingly affiliated debt-relief group asked for another $1,000. Desperate, Mr. Davis paid up.
The story ends with Davis getting nothing in return for his $3,000, and instead needing to borrow $14,000 to save his house two days before it was to be sold at auction.

“I’ve still got my house, but now I’m worse off because my credit has drastically been affected, and now I’ve got an extra loan,” Davis says.

Davis’s story has become part of a national parable. With the downturn in the housing market, scams promising to stop foreclosures or modify loans quickly are growing. This year, the FBI expects to track an estimated 174,000 reports of suspicious activity for mortgage-related fraud cases – a 276 percent increase over 2008.

States are responding. Michigan has promised to refund residents duped by several foreclosure scams. In October, Delaware approved a law that bans companies from charging an upfront fee for promises to modify a loan or forestall foreclosure.
The federal government, too, is considering action. Sen. John Kyl (R) of Arizona has cosponsored a bill that would protect home buyers from fraudulent practices and provide $200 million for states to combat scams. President Obama created a federal task force Nov. 17.

The fraud is “egregious,” said Kay White, director of the Administration of Resources and Choices in Tucson, Ariz., a nonprofit that provides free assistance to homeowners in distress. By the time many homeowners arrive at the agency, “they’ve already been scammed,” says Ms. White.

States are scrambling to get a handle on the problem, which could deepen as large numbers of adjustable-rate mortgages reset to higher levels in the near future.
• In California, complaints to the Office of the Attorney General regarding companies offering loan modification and foreclosure assistance grew to more than 2,500 in the first 10 months of 2009, up from about 200 in 2008, says spokesman Evan Westrup.

Likewise, the state bar has received more than 1,200 complaints this year involving attorneys, says Suzan Anderson of the bar’s Loan Modification Special Team.
“This is a huge problem,” Ms. Anderson says. “I’ve never seen anything like this with attorneys and the real estate market.”

• In Arizona, financial institutions have filed nearly 2,400 reports of suspected mortgage fraud with an estimated $98 million in losses this year, says Julie Halferty of the FBI Mortgage Fraud Task Force in Phoenix. That is up from about 1,780 reports and $72 million in 2008.

Mortgage brokers, real estate agents, and telemarketers formerly pushing credit cards are some of the players exploiting market conditions, says Ms. Halferty. “In 2007, we started seeing an enormous volume of fraud reports in this area,” she adds.

• In Nevada, whose foreclosure rate is the country’s highest, home-owners are now bombarded with advertisements that guarantee loan modifications. In reality, people who fall prey end up in worse financial shape because they pay fees and get no help at all, says John Kelleher, chief deputy state attorney general.

This is where homeowner Davis finds himself. He did research online and found that various lawyers gave United Law Group high marks, which gave him peace of mind. He signed a contract with the firm in March. Soon after, Davis got a call from what he believes was an affiliated group, which persuaded him to enroll in a debt-relief program for a better chance of getting his mortgage loan modified. That cost another $1,000. “They told me my case would be resolved in three months,” he says.

At the company’s suggestion, he stopped paying his mortgage and talking to his lender. By July, he started questioning the lack of progress on his case, and the firm became unresponsive, he says. In August, a foreclosure sale notice left on his front door left him panicked.

Davis says someone at United Law Group called the notice a scare tactic and told him not to worry, but Davis adds that his subsequent calls and e-mails were mostly ignored. In the end, Davis rejected the firm’s final recommendation to file for bankruptcy and instead filed a complaint against the company with the Arizona Attorney General’s Office.

Then he borrowed $14,000 from a relative, got caught up on his mortgage, and stopped the sale of his house two days before it was to happen on Nov. 12.
The State Bar of California recently placed attorney Sean Rutledge, who started United Law Group in August 2008, on “inactive enrollment,” for alleged misconduct related to loan modifications.

A law firm spokeswoman declined to address Davis’s case specifically but blamed banks for being unresponsive to the needs of homeowners. “I can tell you that we are actively working to help all of our clients to resolve their issues,” Nina Vultaggio says.

Arizona is trying to help homeowners like Davis. A state law will require Arizona’s loan officers to be licensed as of next year.

“Anybody’s who’s running a loan modification company should get themselves licensed as a mortgage broker or a mortgage banker or a consumer lender and do it quickly,” says Jack Huddock, a spokesman for the Arizona Department of Financial Institutions.
But that might not be the end of it.

In Nevada, companies that can’t get licensed either because they can’t pass the background check or they can’t come up with a $75,000 bond are just reorganizing themselves as a nonprofit so they can be exempt.

“But they’re still doing the exact same thing,” says Mr. Kelleher. “They’re still scamming people.”

Stealing a Church! Robert Shumake Reveals Real Estate Scammer

Here is an articl I found about someone who tried to steal and sell a church!

Detroiter who tried to sell church guilty of fraud

George Hunter / The Detroit News

Detroit -- A man involved in a complicated scam to sell a church he didn't own has been found guilty on 11 counts of fraud.

Tracy Carmichael, 46, of Detroit in 2007 offered to sell the Temple of God Deliverance on Mount Elliot to a woman who was interested in the property as a land investment.

The scam involved Carmichael finding a "straw buyer" with good credit to take out a mortgage on the church property, said Abed Hammoud, head of the Deeds and Mortgage Fraud Unit, a task force involving the Wayne County Prosecutor's, Sheriff's and Register's offices.

"Carmichael got a quit claim deed without the knowledge of the real owner," Hammoud said. "Then he got the victim to take out a $149,500 mortgage on the property. She thought she was doing it to help out the church."

Carmichael told the woman he would handle all of the paperwork, manage the property and send payments to the mortgage company, though his firm, Media Financial.
Pastor Robert Lodge, who owned the property, later found out that the deed to the church and other documents were false. Lodge never authorized Carmichael to sell the property and discovered his signatures had been forged on the documents.

Lodge only became aware of the crime when his congregation was served eviction papers because they hadn't paid the mortgage.

"I lost my life's work," Lodge said. "I built a ministry for the last 16 years, and it literally was stripped from me. Not only did I lose property and money, but I've lost my church family. We're not set up anywhere else because of the financial hardship this has caused."

Wayne County Sheriff Benny Napoleon said Carmichael had "a moral compass so low he schemed to sell a house of worship. Now the woman is out (her money), and the congregation is on the street."

Carmichael was found guilty of embezzlement over $100,000; four counts of forgery; four counts of uttering & publishing; false pretenses over $20,000; and money laundering 2nd degree. He was remanded to the Wayne County Jail until his Jan. 5 sentencing date.

Hammoud said the scam is common.

"Unfortunately, we see it all the time," he said. "It's fairly easy to get a quit claim deed without the property owner's knowledge. They find a victim who is naïve and has good credit, and get them to take a mortgage out on the property. This is all done without the real property owner's knowledge; then they start getting bills from the bank about paying a mortgage they know nothing about."

Sunday, March 8, 2009

Robert Shumake, Mortgage Fraud Victim, is on a Mission to Generate Public Awareness

As real estate values decline and mortgage guidelines get tougher, fraudsters will devise new and improved schemes to exploit the weaknesses in the market

Detroit, MI -- According to the US Federal Bureau of Investigation, mortgage fraud is one of the fastest growing white-collar crimes in the country. Robert Shumake found this out the hard way, when he was the victim of mortgage fraud.

When Shumake tried to sell a house that he purchased and fixed up, he found out that someone had “stolen” the property and removed his name from the title with a fraudulent quit claim deed! The new owner had moved into the home and took out building permits to work on the property.

It took 2-1/2 years and nearly $60,000 in legal fees to resolve the matter. Mortgage fraud is hard to prove with signed agreements and documents in place and recorded. It is possible to spend thousands of dollars and still not get your property back.

Anyone can be a victim of mortgage fraud, even a real estate industry professional like Shumake, who is the owner of Inheritance Capital Group in Detroit, a company who manages and develops real estate. Robert’s experience led him to join with Michigan state officials to launch a mortgage fraud task force to aid victims of mortgage fraud and promote consumer awareness and prevention.

Robert Shumake’s mission is to inform the public about mortgage fraud and real estate scams and to provide tips on how to avoid being a victim. “Sometimes people will commit identity theft to obtain a housing loan, sell someone else’s house or take over someone else’s property,” says Shumake. “It is my goal to inform the public on how to protect themselves from being victims of this crime.”

Robert Shumake has written many articles on mortgage fraud and real estate scams. His newest blog contains information and tips on how to avoid becoming a victim.


Robert Shumake
Inheritance Capital Group, Inc
25900 West 11 Mile Road
Southfield, MI 48034
Phone: 248-443-0939

Robert Shumake “Mortgage Fraud Alert: Predatory Lenders“

Robert Shumake “Mortgage Fraud Alert: Predatory Lenders“

Predatory lenders are lenders who commit mortgage fraud to help homeowners get a higher loan. They may obtain inflated appraisals, falsify income information or do whatever it takes to qualify the borrower for a mortgage. In many cases, the borrower cannot afford the terms of the mortgage.

Predatory lenders are not out to help the borrower at all; they are only in it for themselves. They are often using their clients in order to gain commissions. A predatory lender looks for clients who have little knowledge and prior experience with mortgages. They will take their application, check their credit, and do whatever it takes to get them approved for the American Dream of homeownership, very often, in a home that they cannot afford.

In many cases, the client gets an adjustable rate mortgage (ARM), where the interest rate is fixed for 2 or 3 years, and then it increases, causing their monthly payment to increase substantially. People find themselves paying on an interest only loan, where nothing is applied to the principal. The lender promises to help the client refinance with a fixed loan before the ARM is reset. Legally, no one can make this type of promise.

A loan officer might have the client sign blank forms, telling their client that they have to see what they can do for them before filling in the blanks at a later time. This is known as ‘backing into the documents.’ When a loan officer has sign forms with blank fields, they are able to manipulate the borrower’s loan documents to fit their commission needs.

Predatory Lending Habits

There are several things predatory lenders commonly do to benefit themselves while seriously hurting their unsuspecting clients. Here are some examples of predatory lending practices:

• Falsifying documents to show the client’s income as being higher than it actually is in order to qualify them for the mortgage; this is illegal.

• Obtaining inflated appraisals to get a higher mortgage; therefore, a higher commission. In this case, the lender and the appraiser are both breaking the law.

• Encouraging clients to borrow assets from family; this is not the way to show financial worth.

• ‘Bait and Switch’ is where the client is presented with specific terms that are changed just before closing.

• Refinancing the mortgage and charging a higher than normal origination fee.

• Selling a high-cost, high-interest loan to a borrower who would qualify for a loan with more favorable terms which the lender also offers

• Convincing applicants to borrow more than they can afford to pay back

• Pressuring applicants to accept high-risk terms like interest only mortgages with high prepayment penalties.

Loan officers are paid on commission; the more loans they sell, the more money they make. The commission earned for selling high-cost loans and additional products and services often encourages a loan officer to commit mortgage fraud in order to benefit himself.

There are certain rules and parameters used for approving and underwriting a home loan. Though these stipulations may seem overly restrictive, they are in place to protect borrowers from getting into a mortgage that they cannot afford to repay.