An old mortgage scam aims to hijack a payment or two
A mortgage scam in which con artists send letters telling borrowers they should begin sending their mortgage payments to a fictitious company that has begun servicing their loan, is making the rounds again. Unfortunately, by the time borrowers figure out their loan has not changed servicers, they’ve already sent one or two mortgage payments to the fictitious company.
Making sense of the story
- According to those familiar with the scam, it typically works because most borrowers are unaware of the rules when it comes to the transfer of mortgage-servicing rights. Under the law, the current servicer is required to send a “goodbye” letter notifying the borrower that payments should be sent to a new company as of a certain date.
- A week or two later, the law says the borrower should receive a second letter, which, by law, should include a welcome missive from the new servicer with the details of the mortgage payment – a breakdown among principal, interest, and escrow. The package also is likely to include a few payment coupons, if not a brand-new coupon book, and self-addressed printed envelopes for borrowers to make payments.
- Both the goodbye and welcome letter should include the mortgage loan number. If either letter does not, or if the information included in one doesn’t match what’s in the other, borrowers should call their original servicers to inquire.
Borrowers only receiving one letter should be extra cautious. Even if everything appears to be standard procedure, borrowers are still advised to call the first company’s toll-free number just to be sure.
The handoff rip-off is so basic that it doesn't even have a fancy name among the specialists who track mortgage fraud. But then, its simplicity is what makes it so endearing to criminals — and so endless.
"It's the same kind of scam as the one from the guys in Nigeria," said Merle Sharick of the Mortgage Asset Research Institute (MARI). "It's the same stuff we've been seeing for 100 years."
It's not among the most reported types of mortgage fraud, so it is probably sliding under the radar of most law enforcement agencies. But Jennifer Butts, a coauthor of the latest LexisNexis MARI fraud case report, says her firm is seeing more of it.
The maneuver "works for maybe two months" because it takes that long for borrowers to realize they've been had, said Becky Walzak, an expert in loan-quality assurance.
When the real servicer calls to tell the borrower the first payment hasn't been received, Walzak explained, the borrower reports that he did indeed send a check, and the two parties usually let it go at that. But when the borrower gets a second call informing him that the payment is still missing or that the next month's payment hasn't been received either, the now-worried borrower tells the servicer about the letter he received a month or two earlier, and the trick is exposed.
"It works for maybe two months before it is discovered," Walzak said. "But if the bad guys are any good, they've taken in thousands of payments from thousands of people. They cash them, and they move on to the next batch of borrowers."
Distributed by United Feature Syndicate.