Mortgage fraud addressed by Indiana legislature

New law attempts to protect citizens against mortgage fraud

Most of America seems to be plagued by the problem of mortgage fraud. The type of fraud can vary, and the areas where certain types thrive can vary as well. The West and Southeast lead the country in scams involving mortgage company scams, while the Midwest seems to be the area most frequented by foreclosure scams. As Indiana is among the national leaders in foreclosure scams, the legislature has attempted to fix this problem by enacting a tough new law.

Foreclosure fraud is a scheme where honest people who are having trouble paying for their home are approached by individuals or companies that offer to “help” them pay for their house. The scam varies, but usually involves tricking the owner into signing over the deed to the property to the criminal. In exchange for that and a fee, the owner believes that he or she will receive help paying the mortgage and that it will be possible to get the title back at some time in the future. Unfortunately, that never happens. The criminal either rents out the house, sells the house, or takes out a loan against it and walks away. The owner is left without their property.

This problem has grown so large in Indiana that the legislature recently passed a tough new law intended to curb this abuse. Among the laws’ new provisions:

• The consumer has three days to cancel the contract. If he or she sleeps on it and thinks better of it, the deal can be canceled with no harm done.
• The “foreclosure consultant” may not obtain power of attorney from the homeowner and they must also obtain a surety bond of at least $25,000.
• The consultant must provide documentation to the consumer outlining exactly what the consumer is signing and what the consumer is to receive.
• The consumer has the right to sue consultants for violations of the agreement and the law provides for recovery in the amount of up to twice the amount of damages.
• The law also permits the authorities to prohibit violators from continuing in business and allows them to issue fines of up to $5000 for each infraction.

If the law proves effective, perhaps other states will follow with tough legislation of their own. The problem has grown as interest rates have increased and consumers who bought homes with adjustable rate mortgages with low payments are seeing those payments increase. The idea of losing a home is one that tends to cause panic among consumers, who often don’t know what to do when they cannot pay their mortgage. Such consumers, out of desperation, often turn to these consultants, whose advertising techniques often consist of simply posting flyers on telephone poles.

Instead of calling strangers for help with mortgage problems, most consumers would be better off simply calling their mortgage company and telling them that they are having a problem paying. In many cases, mortgage companies will be willing to help in some way, rather than lose a good customer. Lenders would much rather help a consumer than see them lose a home to foreclosure. After all, lenders are in the money business, not the real estate business.