Friday, July 31, 2009
On July 17th in this blog I wrote that I had covered my short position in General Electric and went long the stock at $11.70 a share.
Well, take a look at the chart here.
Thank you GE.
A 14.4% gain in two weeks. Annualized that is a 374% return.
Not bad, eh? Talk about high yield investing.
Look at those beautiful gaps upward. And realize this chart only reflects prices at $12.00 and over. I was up before the chart even started.
As I will explain in later posts, GE is now the perfect traders stock. If you know how to read the tape (like me) you can play General Electric as a cash cow.
And in case you are curious what GE has to do with real estate, read this.
Robert J. Abalos, Esq.
Thursday, July 30, 2009
I just read a wonderful book that I highly recommend to you.
BUT WAIT...THERE'S MORE! is the simply mesmerizing book by author Remy Stern that chronicles the television infomercial industry and how those silly late night TV spots selling everything from ab tighteners to cleaning products to---you guessed it---real estate get rich quick schemes has become a $100 billion a year industry.
Of particular interest for anyone thinking about buying one of the real estate courses advertised on the Internet or on late night TV is a chapter in this book called "Crooks and Liars" which of course chronicles the history of so-called "creative real estate" get rich quick frauds of the past.
This book is like a trip down memory lane for me. I got started in real estate investing in the early 1980s and this is just about the same time TV infomercials took hold in America. The earliest leaches in this pond were guys pitching wealth through real estate investing. I can remember their TV spots as if I was awake and unable to sleep yesterday....
Ever wonder what happened to 1980s real estate gurus like Tom Vu, Dave Del Dotto, William McCorkle, and a host of other TV staples pitching their wares to insomniacs all across America? If so, this is your book.
By the way, none of them are still involved in real estate.
The Hall of Shame of creative real estate is long and getting longer. Ultimately the public and the legal authorities catch up with the con artists that steal people's dreams of financial security through real estate.
It is a simple and indisputable fact that virtually every creative real estate guru of the past has either filed for bankruptcy, gone to prison, has been shut down by the FTC or other law enforcement agency, or died broke.
Some have even been murdered by their own customers and business associates. That is how criminal, evil, venal, corrupt and PROFITABLE the sale of these get rich quick courses really are.
Funny how they can supposedly teach others how to make millions but can't make a legitimate dollar for themselves???
Today's crop of scammers is sure to join the list of old time favorites from Remy Stern's super book.
Creative real estate guru Joe Kaiser already has.
Unfortunately, I'm very sad to say John Beck may also be headed towards infamy.
I am currently working with Federal and state law enforcement agencies that are going to be sending a new pack of these charlatans to the dung heap of history very soon.
Anyone who is thinking about buying one of these get rich quick in real estate schemes advertised on the Internet or late night TV needs to read this wonderful book. Learn how desperate people just trying to build financial security for themselves and their family are separated from their money by criminals determined to make a buck at any cost.
And how you really don't need a $89 ab tightener anyway.
Robert J. Abalos, Esq.
Wednesday, July 29, 2009
PennyMac Mortgage Investment Trust ("PMT") will begin trading tomorrow with in a 20 million share IPO priced about $20 per share.
I am very bullish on the mortgage REIT sector these days. Below you will find an article from Bloomberg explaining PMT and how these REITs have risen phoenix-like from the ashes of market destruction.
The fundamentals of this sector are extremely strong. Record low interest rates, lots of so-called "toxic" paper to buy (which in reality is more like gold than sludge), and substantial talent in the industry looking for jobs, just like Stanford Kurland.
I'd buy PMT and the others after their IPO hype has died down. These vehicles have a long way back to respectability so there is no rush to jump in if you plan on holding them long term.
Robert J. Abalos, Esq.
Countrywide Alumni Seek Profits From Housing Collapse
By Elizabeth Stanton
July 29 (Bloomberg) -- PennyMac Mortgage Investment Trust, which plans to raise $400 million in a stock offering today, is betting that the people who helped create the housing crisis will know how to profit from the cleanup.
Chief Executive Officer Stanford L. Kurland, 57, was president and chief operating officer of Countrywide Financial Corp., the loan originator whose co-founder, Angelo Mozilo, was sued by the Securities and Exchange Commission. Ten other senior officials also worked at Countrywide, whose subprime loans have suffered from a 39 percent delinquency rate, according to data compiled by Bloomberg. PennyMac hopes to make money buying mortgages from failed banks and redoing the terms.
“People who are critical of Wall Street will find with justification things to criticize here,” said Stanley Nabi, who oversees $7.5 billion as vice chairman of Silvercrest Asset Management Group in New York. “They’re going to say, ‘Look, these are the people who created this crisis, and now they’re buying this paper on the cheap.’”
PennyMac operates in a growing market. More than 1.5 million properties received a default notice or were seized in the U.S. during the first six months of 2009, a record, according to RealtyTrac Inc., which sells mortgage data. Backed by BlackRock Inc. and Highfields Capital Management LP, PennyMac plans to charge fees similar to those at hedge funds as it tries to rehabilitate loans.
Rising default rates at Countrywide drove its shares down 91 percent through March 2008, prompting a sale to Bank of America Corp., based in Charlotte, North Carolina. Mozilo, who co-founded Countrywide in 1969, was sued in June by the SEC for allegedly hiding the company’s deteriorating finances.
Kurland quit Countrywide in September 2006, ending a 27- year career with the largest U.S. mortgage lender. Once considered Mozilo’s likely successor, Kurland was replaced by David Sambol, one of two top Countrywide executives who the SEC sued along with Mozilo. No one at PennyMac was a target of the lawsuit.
Ray Johnson, a spokeswoman at PennyMac, declined to comment, citing regulatory restrictions prior to initial public offerings. The company cut the size of the deal, scheduled for completion after the close of trading today, from $750 million on July 16 when it announced plans to sell shares for $20 each. They will trade under the “PMT” stock symbol.
The real-estate investment trust says it will buy loans from lenders who failed as well as mortgage companies and insurers. In January, it purchased $558 million of mortgages that the Federal Deposit Insurance Corp. acquired last year after First National Bank of Nevada failed.
The collapse of the U.S. mortgage market has caused more than $1.5 trillion in losses at financial institutions worldwide and prompted the FDIC to close 64 U.S. banks this year, the most since 1992.
PennyMac’s investments may return 15 percent to 25 percent a year, said Evan Gentry, the founder and chief executive officer of G8 Capital, a private buyer of distressed loans and real estate based in Ladera Ranch, California. Two of Gentry’s funds use a similar strategy.
“New mortgage REITs look more desirable than at any time I can remember,” said Dean Frankel, a money manager at Urdang Securities Management who met with PennyMac officials on July 22 to discuss the offering. Urdang, a unit of Bank of New York Mellon Corp. in Plymouth Meeting, Pennsylvania, manages $1.5 billion of real-estate investments. “While we don’t generally invest in mortgage REITs, we are taking a hard look,” he said.
Property Stocks Fall
A Bloomberg index of mortgage REITs plunged 76 percent in 2007 and 2008 and fell 23 percent this year through March 5. It then surged 36 percent, trailing the gain in the Standard & Poor’s 500 Index by more than 6 percentage points.
PennyMac executives plan to charge a management fee equal to 1.5 percent of shareholders’ equity plus an incentive fee that’s one-fifth of profits above a certain level. It would be the first REIT since 2007 to succeed in charging an incentive fee, which are standard among hedge funds. While American Bethesda, Maryland-based Capital Agency Corp. and Cypress Sharpridge Investments Inc. of New York tried to, they scrapped those provisions prior to their IPOs in May 2008 and June 2009, respectively.
At least six other mortgage-related IPOs are pending, five of which also aim to collect incentive fees. New York-based Sutherland Asset Management Corp. amended its prospectus yesterday to remove one.
Investors may agree with PennyMac that its connection with Countrywide is an asset, said Matthew Howlett, who analyzes real-estate securities at Fox-Pitt Kelton Inc. in New York. PennyMac’s offices in Calabasas, California, are less than five miles from Countrywide’s.
“They understand the reasons a lot of these borrowers ended up defaulting,” he said. “They’re uniquely positioned to identify and correct them, and that can be enormously profitable in this environment given the prices.”
PennyMac’s strategy may rely too heavily on the assumption that investor appetite for mortgage-related assets will recover, said Terry Wakefield. He is a consultant to the residential loan industry who helped design Fannie Mae’s mortgage-backed securities business in 1981 and later traded the derivatives at Salomon Brothers Inc.
High default rates on restructured loans may also deter investors, Wakefield said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months, and 63 percent were in default after a year, according to a June 30 report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
“The big issue in PennyMac’s world is: Where are they going to sell those loans, assuming they’ve been effectively modified?” Wakefield said. “I don’t know a lot of people standing in line to buy those assets.”
Tuesday, July 28, 2009
I saw (quite by accident) an interview with real estate guru and investor Bruce Norris on ABC's NIGHTLINE last night.
You can see the same interview by going here.
I am a fan of Bruce Norris. He offers excellent advice on real estate investing through his website and his seminar offerings. I can't dispute that he knows what he is talking about and is honest about real estate as a career and investment.
But I strongly disagree with his suggestion made on NIGHTLINE that investors offer a way out of the housing mess by soaking up extra inventory. He suggested that Fannie recind the "Ten House Rule" on investments even to the most financially solid investors.
I couldn't disagree more.
Investors are a huge part of the problem in today's housing mess. Getting many of them out of the market is a better solution. Much of the excess inventory Norris and others bemoan was specifically created as fodder for investors. In places suffering the greatest pain these days like Miami, Las Vegas, and Riverside, CA (Norris' home turf) spec building specifically for investors to flip is the single largest reason there are so many unsold new homes never lived in by anyone.
Investors walk away from properties a whole lot faster than homeowners that live in them with their families. This logic is inescapable.
I agree with Norris that the government needs to do more to soak up the inventory choking the balance sheets of builders and developers. Obama's first time tax credit is doing little to accomplish this.
A much better solution than Norris or Obama offers is to monetize the tax credit up front so potential homebuyers can actually buy real estate. What good is a tax credit to buy property if you can't afford the purchase up front? This idea is working in California and is overcoming the prime barrier to home ownership---no down payment. The Obama tax credit should be extended to include all home buyers and last beyond the current December 2009 expiration date. It should monetize the tax credit up front so homebuyers that qualify for the credit can borrow against the credit to actually buy a home. This "loan" is then paid off at closing with the tax credit.
This would get empty homes filled with the most stable of occupants. Not tenants, but homeowners with families that plan on sticking around for a while.
America needs to view single family and condo home ownership as it has been since the dawn of time. A place for people to live, not capital to speculate. Homes should be viewed as homes, not rental properties. Real estate investors have plenty of other options beyond single family homes and condos. In fact, these alternatives offer much higher ROIs, cash flows, and more at lower risk.
This all said, I applaud ABC for giving Bruce Norris the chance to speak. He's a smart guy and well worth listening to any chance you get.
Robert J. Abalos, Esq.
Monday, July 27, 2009
Today's new home sale numbers came out today and the mainstream press is having a field day proclaiming the end of the housing recession. Below you will find a typical article reprinted from the Associated Press. The original can be found here.
So what if June 2009 home sales rose by the fastest rate in eight years?
THE PRICES OF THESE HOMES IS STILL FALLING!
The mainstream media long ago became willing shills of many trade associations and government officials, constantly cheerleading markets to make the economy look better than it really is.
Remember the NASDAQ stock bubble of the late 1990s?
Remember the recent housing bubble?
Where was the mainstream media on both?
Now they are telling blatant falsehoods about the "recovery" in progress.
What recovery? When you are still losing money on the home you own or the one you just built day after day after day do you really feel recovered?
There will not be an end to the woes in the U.S. housing market until three things happen:
1. National income begins to rise, something a rising unemployment rate nearly in double digits does not suggest is going to happen anytime soon.
2. Home prices, new and used, start to rise.
3. Home sales, new and used, also rise year-over-year.
We aren't anywhere near #1 yet, let alone #2 or #3.
Shame on the media for lying to Americans. False hope is not hope at all.
Robert J. Abalos, Esq.
in June posted the fastest increase in more than eight years as buyers took advantage of bargain prices, low interest rates and a federal tax credit for first-time homeowners.
While home prices are still falling, the figures released Monday were another sign the housing market is finally bouncing back. Earlier this month, the government reported that new home construction rose to the highest level since last fall. And data out last week showed home resales rose almost 4 percent in June, the third straight monthly increase.
"The worst of the housing recession ... is now behind us," said David Resler, chief economist at Nomura Securities. "We're turning the corner toward increased activity in housing."
New home sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000, the Commerce Department reported Monday.
Shares of big homebuilders soared on the news, with Beazer Homes USA up by more than 13 percent and Hovnanian Enterprises rising 8 percent in afternoon trading. But with home prices still falling, these companies won't be making much money anytime soon.
The median sales price of $206,200 was down 12 percent from $234,300 a year earlier and off nearly 6 percent from $219,000 in May.
In addition to lower prices, buyers are rushing to tax advantage of a federal tax credit that covers 10 percent of the home price or up to $8,000 for first-time buyers. Home sales need to be completed by the end of November for buyers to take advantage.
"The window of opportunity is closing," said Bernard Markstein, senior economist for the National Association of Home Builders.
June's results were the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.
There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply — the lowest level since October 2007. If that number falls to just over 6 months, analysts say, builders will feel more comfortable ramping up construction.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have lost billions.
But it will still be a while before homebuilders turn into an engine for the economic recovery. Construction levels are still weak because builders still have too many unsold homes sitting vacant.
Sunday, July 26, 2009
Here is a press release from the U.S. Department of the Treasury announcing a coordinated Federal and State law enforcement crackdown against the creative real estate foreclosure rescue scams being used to swindle desperate homeowners out of their homes.
Again, compare what law enforcement agencies across America are telling you about foreclosure rescue fraud against the home study courses, seminars, and books of the so-called "creative" real estate gurus who promise you get-rich-quick millions in real estate.
They are teaching you how to STEAL homes, not invest in them.
If you buy one of their courses, you will lose your money. No one makes money on these courses but the people who sell them.
If you attempt to use one of these worthless courses, you will be sued and likely arrested. Most of the techniques described in these courses are obsolete, theoretical, have no application in the real world, or are blatantly illegal.
QUOTE from the press release found here:
"By combining our powers, state and federal authorities are sending a clear message to these mortgage rescue scammers: It is not a question of if we'll come after you; it is only a question of when."
Do you really want to be in their crosshairs?
Robert J. Abalos, Esq.
Federal, State Partners Announce Multi-Agency Crackdown
Targeting Foreclosure Rescue Scams, Loan Modification Fraud
Civil Enforcement Cases, State Enforcement Actions, Alert to Financial Institutions Among New Efforts to Protect American Homeowners Seeking Relief
WASHINGTON – As homeowners and communities throughout the country continue to face devastating consequences from the deep contraction in the economy and the housing market, the Obama Administration today announced a new coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times. The new effort announced today aligns responses from federal law enforcement agencies, state investigators and prosecutors, civil enforcement authorities, and the private sector to protect homeowners seeking assistance under the Administration's Making Home Affordable program from criminal actors looking to perpetrate predatory schemes.
The U.S. Department of the Treasury, the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the Attorney General of Illinois today discussed new initiatives to coordinate information and resources across agencies to maximize targeting and efficiency in fraud investigations, alert financial institutions to emerging schemes, step up enforcement actions and educate consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.
Earlier this year, in an effort to stabilize the housing market and ensure responsible homeowners can afford to stay in their homes, the Administration announced Making Home Affordable, a program to help eligible homeowners refinance or modify their mortgages. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to lower their monthly payments and make their mortgages affordable now and in the future – an opportunity for relief that unfortunately also brings greater opportunity for criminal actors to prey upon consumers seeking assistance.
The FTC recently surveyed online and print advertising for mortgage foreclosure rescue operations nationwide and identified approximately 71 distinct companies running suspicious ads. Treasury's Financial Crimes Enforcement Network (FinCEN) also conducted recent studies on mortgage fraud that found that between July 2002 and June 2008, depository institutions filed nearly 180,000 mortgage fraud suspicious activity reports (SARs), with those involved in mortgage fraud often involved in other types of crime as well.
"The Administration's Making Home Affordable program is a critical piece of our efforts to stabilize the financial system and ensure that it works with our efforts to grow the economy," said Treasury Secretary Tim Geithner. "American homeowners desperately need the relief this program offers, but the very last thing they need is to be taken advantage of as they try to hold on to their homes. This Administration is deeply committed not just to providing at-risk homeowners with assistance but also to cracking down on anyone who seeks to defraud them."
To this end, Treasury and FinCEN announced an advanced targeting effort already underway to combat fraudulent loan modification schemes and coordinate ongoing efforts across agencies to investigate fraud and assist with enforcement and prosecutions. In less than a week, FinCEN's new targeting effort has produced leads that have helped various agencies to halt the illegal practices of those offering loan modification or foreclosure scams. In undertaking this effort, FinCEN will marshal information about possible fraudulent actors, drawing upon a variety of data available to law enforcement, regulatory agencies, and the consumer protection community, for the purpose of identifying and proactively referring potential criminal targets to participating law enforcement authorities.
Through FinCEN, Treasury is also issuing an advisory alerting financial institutions to the risks of emerging schemes related to loan modifications. The advisory identifies certain "red flags" that may indicate a loan modification or foreclosure rescue scam and warrant the filing of a SAR by a financial institution. Examples of possible signs of fraudulent activity, such as requiring that fees be paid before services are provided, are listed in the advisory. In addition, the advisory requests that financial institutions include the term "foreclosure rescue scam" in the narrative sections of all relevant SARs.
As part of the multi-agency effort, Attorney General Eric Holder outlined ways in which DOJ has been cracking down on mortgage fraud schemes, including several successful convictions of scam artists in recent months. He also emphasized the Justice Department's commitment to working with federal and state law enforcement and regulatory partners to ensure a coordinated and comprehensive response to the problem, describing the department's work with the FTC and state attorneys general to reinvigorate the Executive Working Group, which allows partners to coordinate and exchange intelligence on competition and consumer fraud issues. The Attorney General also discussed DOJ's focus on investigating and prosecuting lenders who discriminate against borrowers based on race, national origin, or other prohibited factors.
"For millions of Americans, the dream of home ownership has become a nightmare because of the unscrupulous actions of individuals and companies who exploit the misfortune of others," Attorney General Eric Holder said. "The Department of Justice's message is simple: if you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you."
On the civil enforcement side, the FTC has filed five new cases to halt the illegal practices of individuals and companies offering loan modification or foreclosure scams – including one company that spent 9 million dollars on TV and radio ads in less than one year. The FTC is also joining forces with a wide array of government, non-profit, and mortgage industry members to launch a new consumer education campaign to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.
"Today the FTC announced five law enforcement actions and sent 71 warning letters to operations using deceptive tactics to market their mortgage loan modification and home foreclosure relief services," said Jon Leibowitz, Chairman of the FTC. "We're enforcing the law against these scam artists who are deceiving consumers while they're down; we're putting others on notice that unless they change their ways, they're next; and we're working with other government agencies, non-profits, and mortgage servicers to reach out to our neighbors in distress with the details of how and where to get help."
Under the new campaign, several private sector national loan servicers, including Chase Home Finance, Suntrust Mortgage, GMAC Mortgage, and American Home Mortgage Servicing, are distributing FTC consumer alerts that provide consumers with tips for avoiding mortgage relief scams and direct them to free, legitimate counseling services for at-risk homeowners. The servicers will distribute the materials in monthly statements, in correspondence to delinquent borrowers, in counseling sessions, and on their websites.
Bolstering new outreach efforts to protect homeowners against fraud, HUD Secretary Donovan announced that HUD would begin distributing literature today to all of its housing partners-- HUD field offices and staff, housing authorities, state and local agencies, and non-profit organizations--warning consumers nationwide about loan modification fraud. This and other targeted outreach efforts will help alert communities hard-hit by foreclosure about the legitimate foreclosure assistance available to them.
"We have families on the edge of foreclosure that are being offered things that are too good to be true, and we will take every measure we can to educate and protect consumers and homeowners, bring these scams to light, and work to prevent con artists from exploiting the housing crisis," said HUD Secretary Donovan. "There are legitimate people, places, and agencies that American families can turn to when they are facing foreclosure, starting with www.MakingHomeAffordable.gov and the Homeowner's HOPE Hotline at 1-888-995-HOPE for free foreclosure counseling assistance."
Under the new multi-agency initiative, there will also be strong coordination between federal and state governments that are battling foreclosure scams. The FTC released today a list of more than 20 states that have already taken law enforcement action on loan modification or foreclosure rescue scams. For example, today in Illinois, Attorney General Madigan is filing lawsuits against two Chicago-area mortgage rescue fraud schemes seeking temporary restraining orders to immediately stop the defendants from providing mortgage rescue services.
The numerous rescue fraud lawsuits filed in Illinois –24 to date– illustrate how Attorney General Madigan and other state attorneys general are using their enforcement authority to prosecute mortgage foreclosure rescue fraud across the country. On the state level, more than 150 enforcement actions have been brought against mortgage rescue companies.
"We have repeatedly found that these foreclosure rescue operations are swindling desperate homeowners out of money they can't afford to lose," said Attorney General Madigan. "Struggling homeowners need to know that free help is available. The 24 lawsuits I have filed prove foreclosure rescue operators don't help. They don't call your lender, they don't modify your loan, and they don't represent you in court if you're in foreclosure. All they do is take your money. By combining our powers, state and federal authorities are sending a clear message to these mortgage rescue scammers: It is not a question of if we'll come after you; it is only a question of when."
Saturday, July 25, 2009
Thinking about buying one of those real estate get-rich-quick home study courses or seminars you see advertised on late night TV or the Internet?
Creative real estate is a fraud and the gurus who sell this garbage know it.
Before you spend your hard earned money to enrich the pockets of some scam artist selling nonsense on the Internet compare the contents of the course you are considering with this warning from the U.S. Comptroller of the Currency. This is the U.S. government warning homeowners against mortgage and foreclosure rescue fraud.
Compare the course or seminar offering to the official warning. You will find that many of the "investment techniques" taught in these books, courses, and seminars are nothing more than the teaching of foreclosure rescue and mortgage fraud.
It's easy to make money when you STEAL real estate from desperate people.
Not so easy making it in an economy where real estate values have fallen 30% or more in the last three years.
The official warning is reprinted below from this source.
READ IT. COMPARE. Don't get scammed. Don't become a victim of mail fraud or even worse, a foreclosure rescue fraud con artist yourself.
Robert J. Abalos, Esq.
Comptroller of the Currency
Washington, DC 20219
May 16, 2008 (Superseded by CA 2009-1 on April 21, 2009)
Mortgage Modification Scams and Foreclosure Rescue Scams
Scams that promise to “rescue” you from foreclosure are popping up at an alarming rate nationwide, and you need to protect yourself and your home.
If you’re falling behind on your mortgage, others may know it, too — including con artists and scam artists. They know that people in these situations are vulnerable and often desperate. Potential victims are easy to find: mortgage lenders publish notices before foreclosing on homes. Private firms frequently compile and sell lists of these foreclosed properties and distressed borrowers. After reading these notices, con artists approach their targets in person, by mail, over the telephone, or by e-mail. They often advertise their services on television, radio, or the Web, and in newspapers, describing themselves as “foreclosure consultants” or “mortgage consultants,” offering “foreclosure prevention” or “foreclosure rescue” services. And they are only too happy to take advantage of homeowners who want to save their homes.
If someone offers to negotiate a loan modification for you or to stop or delay foreclosure for a fee, carefully check his or her credentials, reputation, and experience, watch out for warning signs of a scam, and always maintain personal contact with your lender and mortgage servicer. Your mortgage lender can help you find real options to avoid foreclosure. It is important to contact your mortgage lender early to preserve all your options. There are legitimate consumer financial counseling agencies that can help you work with your lender.
This Consumer Advisory, issued by the Office of the Comptroller of the Currency (OCC), describes common scams, suggests ways to protect yourself, provides information on U.S. government loan programs and counseling resources, and lists 10 warning signs of a mortgage modification scam.
Here are some examples of scams related to mortgage modification and foreclosure avoidance.
Always proceed with caution when dealing with anyone offering to help you modify your mortgage or avoid foreclosure. Remember that you do not need a third party to work with your lender — any such party should make the process easier, not harder and more expensive.
Friday, July 24, 2009
'Billionaire investor Warren Buffett says now is a good time to invest in stocks, despite the Dow Jones Industrial Average topping 9,000 for the first time since the beginning of the year.
Speaking during a live interview Friday morning on the CNBC television network, Buffett said he would much rather own stocks with the Dow at 9,000 than have a long position in U.S. Treasuries right now.
He said business is still flat, but that investors shouldn't wait until businesses turn around before investing in stocks again.
"If you wait until you see the robin, spring will already be over," said Buffett, chairman of Berkshire Hathaway Inc.
He did issue a warning about inflation, saying that the dollar would buy less 10 years from now than it does today. But he said that doesn't mean the actions being taken today to fix the economy are wrong just because it may cause inflation.
Buffett was on the business cable network to promote his partnership in a new series of Web-based educational cartoons known as "The Secret Millionaires Club." He said the idea behind the cartoons is to help entertain children and young people while delivering an educational message such as warning them about the dangers of credit card debt."
To read the complete article from the Nashville Business Journal, go here.
It goes to say I'm a huge Warren Buffett fan. I'm learned a great deal from him over the years. I'm also a long term Berkshire Hathaway shareholder.
But Warren is half wrong here.
The time to buy stocks was six months ago, when the market had cratered. Now is the time to prune positions, add to some for sure but get rid of all the easy money that rode the market tide back up to normal and average gains. Most stocks are overvalued now, not cheap.
Personal finance experts agree. You should always be buying stocks, regardless of market timing conditions. For Warren to suggest otherwise is a bit inaccurate. Dollar cost averaging is a great example of how to make money in the market regardless of stock price direction.
I see no great valuations in the stock market these days. Some cherry picking, yes. But most of the earnings gains lately have been made on budget cuts not income growth. It's easy to report good numbers based on slashing employment, cutting commodity costs, and reducing R&D budgets.
It's harder to do when you actually have to sell new things to new customers. I don't see any of that lately in the companies I study.
Warren is a great investor. He's an awful market timer.
Robert J. Abalos, Esq.
Thursday, July 23, 2009
FTC Cracks Down on Scammers Trying to Take Advantage of the Economic Downturn
New Public Education Video Helps Consumers Steer Clear of Business Opportunity Fraud
The Federal Trade Commission today announced a law enforcement crackdown on scammers trying to take advantage of the economic downturn to bilk vulnerable consumers through a variety of schemes, such as promising non-existent jobs; promoting overhyped get-rich-quick plans, bogus government grants, and phony debt-reduction services; or putting unauthorized charges on consumers’ credit or debit cards.
Dubbed “Operation Short Change,” the law enforcement sweep announced today includes 15 FTC cases, 44 law enforcement actions by the Department of Justice, and actions by at least 13 states and the District of Columbia. During a joint press conference today at the FTC, David Vladeck, Director of the FTC’s Bureau of Consumer Protection, was joined by Assistant U.S. Attorney General Tony West; Roy Cooper, Attorney General of North Carolina; and a Washington, D.C. job seeker who was conned by a company that made false promises of maintenance and janitorial work.
“Rising unemployment, shrinking credit, record-setting foreclosures, and disappearing retirement accounts are causing consumers tremendous anxiety about making ends meet,” Vladeck said. “But to con artists, today’s challenging economy presents just another opportunity to play on consumers’ worry and bilk them out of money.”
“Thousands of people have been swindled out of millions of dollars by scammers who are exploiting the economic downturn,” Vladeck added. “Their scams may promise job placement, access to free government grant money, or the chance to work at home. In fact, the scams have one thing in common--they raise people’s hopes and then drive them deeper into a hole.”
To help consumers understand how easy it is to be conned--and how to avoid fraud--the FTC produced a new consumer education video featuring a former scammer who hawked phony business opportunities and ultimately served prison time for deceiving investors. To view the video, go to ftc.gov or YouTube.com/ftcvideos. In the video, the former scammer gives an insider account of how these operations use high-pressure tactics and celebrity endorsers to trick cash-strapped consumers, and how consumers can protect themselves by demanding written disclosures on earnings and other sales data.
Operation Short Change: FTC’s Law Enforcement Actions
The FTC today announced that it has brought eight new cases against companies that have conned consumers who are struggling to make a living and pay their bills during these difficult economic times. The Commission brought seven additional cases challenging similar conduct earlier this year.
In each new case, the FTC alleged that the defendants’ practices were deceptive or unfair. In some of the cases, the FTC also charged the defendants with making illegal electronic funds transfers or violating the Telemarketing Sales Rule.
In the law enforcement actions announced today, the Commission charged:
John Beck/Mentoring of America, two principals, and three purported “inventors” marketed three get-rich-quick schemes, duping hundreds of thousands of consumers into paying approximately $300 million. The defendants marketed “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” The defendants allegedly made false and unsubstantiated claims about potential earnings for users of these systems. They used frequently aired infomercials to sell the systems for $39.95 and then contacted the purchasers via telemarketing to offer “personal coaching services,” which cost several thousand dollars and purportedly would enhance their ability to earn money quickly and easily using the systems. In addition, all purchasers were signed up for continuity programs that cost an additional $39.95 per month, but which were not adequately disclosed to consumers. Some consumers also continued receiving unwanted sales calls after they told the defendants’ telemarketers to stop calling. This case was filed in the U.S. District Court for the Central District of California.
Wagner Ramos Borges, through a host of front companies, including “Job Safety USA,” allegedly systematically targeted people seeking maintenance and cleaning work. Luring job seekers with print and online classified advertisements in newspapers throughout the country, Borges allegedly tricked them into paying $98 for a worthless and needless credential called a "certificate registration number" supposedly so that the consumers could get maintenance or cleaning jobs–jobs that Borges did not provide. This case was filed in the U.S. District Court for the District of Maryland Greenbelt Division.
Grants For You Now and its affiliates and principals operated Web sites such as
grantsforyounow.com, grantoneday.org, and easygrantaccess.com that deceived consumers by promising them free government grant money to use for personal expenses or to pay off debt. According to the FTC complaint, after obtaining consumers’ credit or debit account information to process a $1.99 fee for grant information, the defendants failed to adequately disclose that consumers would be enrolled in a membership program that cost as much as $94.89 a month. Some consumers also were charged a one-time fee of $19.12 for a third-party “Google Profit” program. All the defendants’ Web sites falsely offered a “100% No Hassle Money Back Guarantee.” This case was filed in the U.S. District Court for the Central District of California.
Cash Grant Institute and its principals allegedly waged an automated robocall campaign promoting bogus claims that consumers were qualified for grant money from the government, private foundations, and wealthy individuals that they could use to overcome their financial problems. They made similar misleading claims about "free grant money" on their Web sites, cashgrantsearch.com and requestagrant.com. This case was filed in the U.S. District Court for the Western District of New York.
Mutual Consolidated Savings, its affiliates, and principals used telemarketing robocalls and the Internet to push a phony “Rapid Debt Reduction” program to consumers in the United States and Canada, according to the FTC complaint. The defendants allegedly convinced consumers to pay them $690 to $899 for the program by misrepresenting that the program would reduce credit card interest rates, save thousands of dollars and enable consumers to pay off their debt three to five times faster than they could under their current payment schedule. The defendants also failed to make good on promises that they would refund the fees paid if consumers’ credit card interest rates were not reduced. Finally, they did not disclose to Canadian customers that the quoted price was in U.S. dollars. This case was filed in the U.S. District Court for the Western District of Washington at Tacoma. In investigating Mutual Consolidated Savings, the FTC received assistance from the Canadian Competition Bureau. Both the Competition Bureau and the FTC are members of the Vancouver Strategic Alliance, a law enforcement task force located in Vancouver, British Columbia, Canada. In carrying out the terms of the court order in Mutual Consolidated Savings, the FTC received assistance from the Tacoma, WA Police Department.
Google Money Tree, its principals, and related entities allegedly misrepresented that they were affiliated with Google and lured consumers into divulging their financial account information by advertising a low-cost kit that they said would enable consumers to earn $100,000 in six months. They then failed to adequately disclose that the fee for the kit would trigger monthly charges of $72.21, the complaint states. This case was filed in the U.S. District Court for the District of Nevada.
Penbrook Productions, run by Michael Allen Brooks, promoted a work-at-home scheme
online that used spokesperson “Angela Penbrook,” and charged $197 for the opportunity to become a “certified” rebate processor, earning as much as $225 per hour. According to the FTC complaint, after purchasing, consumers discovered that the work-at-home “opportunity” had nothing to do with processing rebates, but merely instructed the consumers about becoming an affiliate marketer. Despite Penbrook’s “100% Ironclad, 3-month ‘Make Money Or It’s Free,’ Triple Satisfaction Guarantee,” consumers then found that they could not get a refund. The
defendants thus misrepresented that consumers would be hired as rebate processors, made false earnings claims, and misrepresented the refund guarantee. This case was filed in the U.S. District Court for the Central District of California Southern Division.
Classic Closeouts, illegally made unauthorized charges and debits to the consumers’ accounts months or years after they bought low-cost clothing or household goods from classiccloseouts.com, the FTC charged. The charges usually ranged from $59.99 to $79.99, and Classic Closeouts charged some consumers’ accounts multiple times. Consumers’ efforts to contact the defendants to contest the charges were unsuccessful. Many consumers also disputed the charges with their financial institutions. After the financial institutions reversed the unauthorized charges, the defendants contested these disputes, falsely claiming that consumers had chosen to join the Classic Closeouts “frequent shopper club.” This case was filed in the U.S. District Court for the Eastern District of New York.
The Commission vote to issue each complaint was 4-0. The Commission has obtained
temporary restraining orders barring further illegal conduct and freezing the assets in these cases: FTC v. Wagner Ramos Borges d/b/a Job Safety USA, FTC v. In Deep Services, Inc. d/b/a Grants For You Now, FTC v. Cash Grant Institute, FTC v. Mutual Consolidated Savings, FTC v. Google Money Tree, and FTC v. Classic Closeouts, LLC. The agency is asking the courts for permanent injunctions that would provide for possible consumer redress in each of the cases announced today.
The FTC would like to acknowledge the assistance of the San Bernardino County Sheriff's Department and the Better Business Bureau of Southland, Inc., Colton, California, in connection with FTC v. In Deep Services, Inc.; and the Utah Department of Commerce’s Division of Consumer Protection and the Draper Police Department in connection with FTC v. Google Money Tree.
In addition, the FTC initiated, settled or otherwise resolved seven law enforcement actions earlier this year in similar types of cases:
- Freedom Foreclosure Prevention Services, http://www.ftc.gov/opa/2009/06/freedom.shtm, an alleged employment and foreclosure-rescue scam.
- Medical Billers Network Inc., http://www.ftc.gov/opa/2009/05/mbn.shtm, an alleged work-at-home scam involving medical billing work.
- Network Services Depot, http://www.ftc.gov/opa/2009/04/nsd.shtm, an alleged Ponzi scheme involving an “Internet kiosk” business opportunity scam.
- United Credit Adjusters, Inc., http://www.ftc.gov/opa/2009/03/unitedcredit.shtm, an alleged credit repair operation that made false and deceptive claims to consumers.
- Group One Networks, Inc., http://www.ftc.gov/opa/2009/03/groupone.shtm, an alleged telemarketing scam offering consumers with poor or no credit a general-use credit card for an up-front fee of as much as $250.
- Global Marketing Group, http://www.ftc.gov/opa/2009/02/gmg.shtm, an alleged payment-processing scam involving fictitious credit cards and unauthorized debits made to consumers’ bank accounts.
- Market Development Specialists, http://www.ftc.gov/opa/2009/01/mds.shtm, an alleged scam involving rebates for computer equipment and other electronics.
The enforcement actions announced today named the following defendants:
Mentoring of America – Gary Hewitt; Douglas Gravink; John Beck; John Alexander; Jeff Paul; Family Products, LLC; John Beck Amazing Profits, LLC; John Alexander, LLC; and Jeff Paul, LLC, doing business as Shortcuts to Millions, LLC. Wagner Ramos Borges – d/b/a, Job Safety USA, Sparkle Industrial, Sparkle Maintenance, Star Maintenance, Aim Janitorial &
Flooring, and United Maintenance. Grants for You Now – Ryan Champion and Joseph C.
Fleming IV. Cash Grant Institute – Paul Navestad aka Paul Richard; Global Ad Agency, Domain Leasing Company, and/or Global Advertising Agency; and Chintana Maspakorn aka Christina Maspakorn. Mutual Consolidated Savings – Paul Morris Thompson and Miranda Cavender. Google Money Tree – Infusion Media, Inc.; West Coast Internet Media, Inc.; 2 Two Warnings, LLC; Two Par Investments, LLC; Platinum Teleservices, Inc.; Jonathan Eborn; Stephanie Burnside; Michael McLain Miler; and Tony Norton. Penbrook Productions – Make You Famous Consulting; Process from Home; and Michael Allen Brooks. Classic Closeouts – classiccloseouts.com; ThirdFree.com; and Daniel Greenberg.
NOTE: The Commission authorizes the filing of complaints when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.
Copies of the documents related to these cases are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.
- MEDIA CONTACT:
Office of Public Affairs
Office of Public Affairs
- STAFF CONTACT:
Bureau of Consumer Protection
Karen S. Hobbs
Bureau of Consumer Protection
Cases Announced Today: FTC File Nos. 072-3138, 092-3066, 092-3103, 092-3099, 082-3216, 092-3060, 092-3122, 082-3236
Other 2009 cases: FTC File Nos. 092-3061, X05-0036, 042-3188, 082-3211, 072-3230, 062-3186, 072-3201
Despite my venal contempt for the fraud of creative real estate, this is actually quite sad news in a way for me.
John Beck has always been one of those "super gurus." Extremely knowledgeable and honest. One of the first real estate courses I ever purchased was his FORCED SALE WORKBOOK, a masterpiece by any description. It is by far one of the finest pieces of real estate writing ever published. His reputation for decades in this business has been exceptional, stellar, beyond reproach.
All I can ask is WHAT HAPPENED? The screaming and hyperactive John Beck of his infomercials is not the John Beck many of us know.
The fact the FTC has gone to trial against John and the others means that all attempts to work out a cease-and-desist order have failed. John and his company must believe they have a strong case against the FTC or why bother to fight the Feds?
But do they? REALLY? I know a great deal about buying real estate at tax sales (I wrote a book about it and have done it for many years) and his course (which I own) is pure fluff.
Again, this fall from grace, at least from my grace, makes me quite sad.
Nevertheless, when the FTC comes to the Rocky Mountain states, as I know they are very soon, I will perk up again and be very happy.
Robert J. Abalos, Esq.
Wednesday, July 22, 2009
The reason I reprinted the entire piece is because I wanted you to have an illustration of absurdity right before your eyes. Here is Ben Bernanke telling Congress what needs to happen to help the U.S. economy knowing all to well it is precisely what is NOT happening. And NOTHING is going to make the U.S. real estate market improve until the U.S. economy improves.
Bernanke knows, for example, that Americans are not spending money despite his best desires that they would. Americans now have the highest savings rate since 1952. Wouldn't you save money too if you thought you would lose your job any day?
As to Bernanke's "let's state the obvious" comment that the economy is recovering when more jobs are being created, great news. But Bernanke ignores the simple fact reported by the Bureau of Labor Statistics that 7.2 million people have lost their jobs since this recession officially began in December 2007 and just last month alone another 433,000 joined the ranks of the unemployed.
Only in America do politicians talk of improvement through solutions when they know precisely the opposite is happening.
No, correction. Only in Washington D.C.
Robert J. Abalos, Esq.
Bernanke added that Fed officials expect a recovery to start off relatively slow, partly because consumers are grappling with high debt and housing price declines.
"We don't expect the consumer to come roaring back by any means," Bernanke said, adding that the American consumer isn't going to be the source of a global boom. He said U.S. officials are encouraging trading partners in Asia and elsewhere to substitute their own domestic demand for the American consumer. And we're seeing, for instance in
Responding to questions from lawmakers, Bernanke said that without the controversial
"The situation now is very poor," he said. "Americans are suffering. But I do believe we have a much better situation today than we would have if we had seen a collapse of the financial system last October."
Bernanke declined to wade into how to expand coverage and improve care in the healthcare system, beyond urging that the issue of cost remain on the "front- burner."
"Any program that is undertaken should look to how we're going to get control of costs so that it will not bankrupt both our government and eventually the economy," he said.
He added that troubles in both the commercial and residential real estate markets could continue to cause problems at banks.
"The systemic risks today I think come from the fact that the financial markets are still unstable," said Bernanke.
U.S. Sen. Charles Schumer, D-N.Y., meanwhile, said
In response, Bernanke agreed that banks are cutting off borrowers who can repay. "Of course it's happening," he said, adding that the Fed is urging banks to loan to creditworthy borrowers. He added, though, that banks' loan terms are likely to be tougher as a result of the crisis and that helping small businesses is "one of the toughest areas" for the central bank."
Tuesday, July 21, 2009
Despite all the problems that exist in the United States and with its economy, some genuine perspective is in order. And it comes in the form of this sickening story from Iran, one of the worst cases of political degeneracy I have encountered.
I will skip all the gory details and let you read them yourself. This article from the Jerusalem Post sums it up.
Even the Nazis who executed prisoners by the millions never stooped to this level of barbarity.
And the world talks and dithers and debates while these madmen build nuclear weapons?
America is far from perfect but we can look down on such conduct and scream with rage. The world loudly condemns perceived abuses at Guantanamo Bay but where is the international outcry over this horror?
I'm listening. So far....aside from the crickets chirping in the background.....nothing....nothing....
L'idée des motifs avec des terroristes sans force ou avec l'apaisement est naïve, et je pense que c'est dangereux.
Robert J. Abalos, Esq.
Monday, July 20, 2009
Most of what masquerades on the Internet and in the mainstream media as profound real estate information is pure rubbish.
Bunk. Nonsense. Regurgitated pablum written by communication majors and TV anchors and not genuine real estate professionals in touch with their markets.
A prime example of how to actually write a real estate book can be found in author Robert J. Schiller's newest book, THE SUBPRIME SOLUTION.
This book in one word---brilliant.
Schiller, who coined the now famous phrase with his book "IRRATIONAL EXUBERANCE" is a market visionary. He doesn't merely report on what is happening but, more importantly, what will happen.
And he's dead on accurate. He has a proven track record beyond reproach.
THE SUBPRIME SOLUTION explores more than just the problems of the subprime mortgage mess and how to fix it but explains a host of problems related to the real estate business in particular and the U.S. economy in general.
Schiller echoes many of the themes I have raised in my writings for many years. For example, I believe that the assumption that U.S. real estate prices will continue to rise as they have for the last two hundred years is a false premise. It is my opinion (and Schiller's too) that much of U.S. suburban development is obsolete, based on the automobile centric business model of suburban sprawl. I wrote about this in my 2001 book, INVESTING IN LAND.
Obsolete properties do not rise in value. Neither does real estate in a stagnant and declining national economy.
This book is critical of government policy that caused the mortgage mess but also offers many solutions I completely support, such as subsidizing the financial information given to investors with tax credits. The rich can afford to buy great unbiased investment advice and get tax deductions for it. The poor and middle class cannot. They rely on paid professionals (like real estate agents) who have a profit incentive for giving biased advice.
Skewed opinions based on the financial needs of others and not your own leads to bad investment decisions. Which give us the mess we're in. Ask anyone who bought at the height of the real estate market their opinion on this issue.
I cannot recommend this book more highly. It is the best analysis of the subprime mortgage nightmare I have ever read and offers more ideas, solutions, and quite frankly dire predictions for U.S. real estate than any book I've ever read.
READ THIS BOOK!
For the record, I do not know Robert J. Schiller or have any financial stake in the sale of his books.
Robert J. Abalos, Esq.
Saturday, July 18, 2009
Here is a news report from CNN anchor Gerri Willis on how foreclosure rescue fraud schemes work. This is a video report put up on You Tube and edited into two parts. Watch both.
Compare her report to virtually any creative real estate course being sold today. Same techniques, same promises, same procedures, same everything.
The real estate gurus that sell these courses are an embarrassment to the industry and themselves. They are criminals and they know it---but they don't care. They are making a fortune off the suffering and misery of innocent people, desperate people, the sick, the unemployed, and the elderly.
Law enforcement across the nation knows about their activities and the noose is tightening around their necks. I can't wait to see the scaffold drop and relish the pleasure of them dangling at the end of the rope.
Robert J. Abalos, Esq.
Friday, July 17, 2009
A few days ago I wrote in this blog about my short position in General Electric.
Well, today GE did not disappoint me or the other shorts out there.
Shares in General Electric fell a whopping 6% on heavy volume---almost double the normal trading average. Here is a news story on why GE fell so hard so fast today. The bottom line? A disappointment on earnings what else?
Over the last few days GE shares were actually rising, against my short position so I added to it, making today a windfall gain for me. This call was obvious ahead of what was surely going to be grim news for the company.
GE is a great company with superior managers coping with lots of bad market calls and a still deteriorating economy. It still represents a core holding for most investors since it is a bellweather stock for the U.S. economy. But a shrinking GE will mean a shrinking stock price for some time to come. GE Capital, once the growth engine of the company, is now an albatross about its neck.
So what is the future for GE's share price over the next few days, weeks, months? Check out those gaps up and down in the chart above. Not good for a company the size of GE. I'm now long the stock as part of a new position I'll explain at another time.
Buy on the rumor, sell on the news?
No. In GE's case today it was sell on the rumor, buy on the news.
Robert J. Abalos, Esq.
Thursday, July 16, 2009
Most so-called "creative real estate" techniques really are just the teaching of foreclosure rescue fraud. It wasn't always this way but it has become so today.
Just find someone in foreclosure. Get the deed to their home. Then strip out the equity.
Of course you can make money fast in real estate when you are STEALING the homes of desperate people, giving them false hope they can stay in their homes, and then crushing the last financial drop of blood out of their savings.
Here is an excellent article on foreclosure rescue fraud. Compare what is described in the article against virtually any creative real estate course being offered today and you'll see I'm right.
YOU DO NOT WANT TO USE THESE TECHNIQUES TO MAKE YOURSELF MONEY IN REAL ESTATE. People get sued, go to jail, and lose everything they own trying them.
Here is the full text of the article reprinted below. Read it and learn. I warned you. Save your money.
Robert J. Abalos, Esq.
Foreclosure rescue fraud is sweeping the country and can end up costing you the home and equity you're desperately trying to save from foreclosure.
In these tough economic times, mortgage foreclosure rescue scams are sweeping the nation. Foreclosure rescue fraud is both devious and cruel. Homeowners, finding it difficult to make ends meet and facing foreclosure, are promised help to save their homes. These scammers often turn around and steal the homes from those they promised aid to. Some collect large fees for services never provided and are never seen from again.
In any form, mortgage foreclosure rescue scams add insult to injury and are expected to grow in popularity with crooks as Americans default on their mortgages in larger and larger numbers.
Foreclosure rescue scams usually fall into one of the following three categories
- Phantom help - In this scam, the supposed rescuer charges very high fees for basic phone calls and paperwork that the homeowner could have done. Or, the rescuer will make promise to represent the homeowner but will not follow through. This is really a too little too late scam as in the helpless homeowner receives too little (or no) help too late to stop the foreclosure from taking place.
- Bailout - Here the scammer bails the homeowner out by helping them get rid of the house. The way the scammers get the house varies, but each method ends with the homeowner surrendering the title to the house on the promise that they can stay on as renters and buy the house back once things have been "fixed." In the end, of course, the homeowner can't buy the house back and the supposed rescuers get most, if not all, of the equity. (EDITOR NOTE: This is virtually every creative real estate course scam being offered in a nutshell.)
- Bait and switch - This is much worse than the bait and switch routines executed by unethical car dealers. At least with those scams you still get a car. The only issue there is that, you just get to spend more money for a different car than you wanted. The bait and switch with foreclosure scams involves signing away the ownership of your home.
The scammers will tell the victim that they are signing documents for a new loan that will solve their problems. In reality, they are signing forged documents that will give the crooks ownership of the home. To make matters worse, the victim will still owe for the mortgage but will no longer have the asset.
Perpetrators of foreclosure rescue scams prey on the desperate and weak
As is the case with any scam, avoidance is the best medicine. This is particularly true with foreclosure scams as undoing the damage done will involve money for attorney fees, time, and intervention by state regulators. When people are desperate, they will believe just about anything if it involves much needed help. Just remember, if something sounds too good to be true, it probably is.
These scams are so new, and the laws are so vague regarding them, that law enforcement has so far been reluctant to intervene. Even if the con artists were prosecuted, it would probably not be enough to save the home that was being foreclosed on in the first place.
Foreclosure rescue scams usually begin with offer too good to be true
For the purposes of our discussion, we will refer to the scam artist as a rescuer even though they are anything but.
- A rescuer finds homeowners in need of "help" through local public-foreclosure notices. Believe it or not, there are actually companies that specialize in compiling and selling such lists.
- The rescuer advertises their service by dropping a card or flier on the victim's doorstep or calls to offer their service. The rescuers have also taken to posting ads in public places. Ignore posters, fliers and especially handwritten notes offering help for your foreclosure.
- A meeting is set up. At the meeting, the rescuer builds up the victim's hope and promises a fresh start. There are also empty promises made such as that they will sell the house back to the victim at some point. What typically happens is the rescuer sets the rental price at a level that the victim cannot afford, then they move to evict them for failure to pay the rent. What's even worse is that all it took for the rescuer to buy the property was to payoff the delinquency.
- The rescuer will recommend that you break off contact with the lender and any counselor that you may have been working with. This is the exact opposite of what you should be doing. If you are in a foreclosure, you need to be in contact with your lender to find out what you can do to fix the problem.
- The rescuer will do very little to help leading up to the actual foreclosure. They might make a phone call or have their prey sign some innocuous paperwork to make it look like they are really trying to help. Then, when it is too late to stop the foreclosure, the property is either taken when the scam is completed or sold to someone else at foreclosure. If the latter event happens, there is little if any equity left due to the rescuer's fees.
- Homeowners who thought they had a deal to continue as renters can now be evicted from the very house that they owned. Even worse, because the mortgage was not paid off, the victims are without a place to live and owe the mortgage!
Foreclosure rescue fraud utilizes basic tactics and conditions to gain the victim's trust
It seems like foreclosure scams would be too complicated to execute. At their most basic, however, they utilize some very basic tactics under favorable (to the con) conditions.
- The use of lies, exaggeration, misinformation and pressure.
- Blind trust in someone that the victim's think really want to help them.
- Fraud, deception and forgery.
- The desperation of the victim who feels his or her dream slipping away.
- Affinity fraud. These scams are often perpetrated by people of similar ethnic, racial, religious or age groups. The crooks understand that people who are like you are more likely to be on your side.
- The homeowner's often lack in education or financial sophistication.
Foreclosure is difficult enough without scams being involved in the process. Follow these do and don'ts
- Do not bury your head in the sand. The problem will not go away, and will only get worse if you ignore it.
- Do make sure that you are in foreclosure. If you are behind in payments, you will receive what is called a deficiency notice. These letters notify you of your delinquency and give you a chance to resolve the debt. If you receive a Notice of Trustee's Sale, or similar document, you are in foreclosure.
- Do speak with your lender. Try to work with your lender to restructure the payments or refinance the loan.
- Do learn the laws regarding foreclosure for your state. It is important to know how much time you have to resolve the issue.
- Do contact a counseling agency. This is often too big of an issue for a person to handle on his or her own. Make sure that the counselor is certified by the Department of Housing and Urban Development (HUD). Their website is www.hud.gov.
Be careful when choosing a counselor and pay attention to the certification requirement recommended above. Some counselors are scammers in their own right and will overcharge for services that they not even provide. It's really very easy to tell a scammer from a legitimate counselor: You should not have to pay for legitimate housing counseling.
- Do contact an attorney. You can find one through the National Association of Consumer Advocates ( www.naca.net ). Remember, you get what you pay for so you may be better off searching locally for a consumer protection attorney.
- Do not sign a contract under duress. Always request to take time to review any documents on your own and at your own pace.
- Do not enter into oral agreements. Get in any offers in writing and tell whoever is making the offer that you and/or your representative will review any and all offers.
- Do not make payments to any party other than the lender.
- Do not sign a home-sale contract where you are not released from your existing mortgage.
- Do not sign a quit claim deed without being specifically instructed by your attorney or representative to do so. Do not agree to any deal that allows you to rent the property and then buy it back at a later date.
- Do not accept an offer from somebody who wants to make good on your missed payments and take the house off your hands in exchange for documents that assign them the surplus from the foreclosure sale. Think about it, if you owe $200,00 on your mortgage, plus arrears of $10,000, and your house is worth $250,000, you stand to make money on the sale.
- Do sell your home but only if there are no other options. It is not always possible to resolve delinquent mortgage payments. Selling a home and receiving the equity is much preferred to having your home stolen by thieves.
What do to if you get caught in a foreclosure rescue scam
If you get caught in one of these scams it is imperative that you contact a consumer protection lawyer right away. An attorney can assist you as you navigate your way through hearings with enforcement agencies, eviction hearings and in lawsuits. Not a pretty picture.
If you believe that you are the victim of criminal activity, such as forged documents being presented for your signature, you should contact your local law enforcement agency. Unfortunately, these scams are so new that there aren't many resources available to fight them. Consumer protection groups are already advocating for laws to fight these types of scams.