Anonymous
MSFRAUD
Wed Jan 21 21:46:00 2004
12.162.180.132


http://www.msfraud.org

There are some basic things to realize about how your home can be taken from you in mortgage servicing scams.

In our Flyers section, B. J. Moose’s "Do it Yourself Owl Hunting" is one resource to help you fight this scam.
• These are not "predatory lenders." These companies do not loan money. They operate in the
lending industry after-the-fact. They take on a function that a lender doesn’t want - the backroom
functions of handling payments, escrow accounts, annual statements, dealing with borrowers,
collections, etc. The perpetrators of the loan servicing scam acquire the servicing rights to loans that
other companies have already made. (Loans that were deliberately constructed by predatory lenders are
ideal for processing through servicers that specialize in aggressive collections or rapid foreclosure
processing, but the loan servicing scam can be operated against any mortgage loan if the servicer
acquires the rights from the lender.)
• These scams are designed and deliberately operated. These situations are not errors, mistakes or
situations where a servicer’s managers or employees failed to do their job. Their systems are well-
designed and state-of-the-art in terms of analytical technology that helps them choose and process their
victims. These scams generate enormous profits from a business that is difficult to run, people and
litigation intensive and normally only marginally profitable. Many have failed and been acquired
(Fairbanks bought several).
• You, the borrower are not their customer. Lending companies and investors are their customers. As
a borrower being "serviced" in the scam, you are simply one of millions in an ever-growing pool of what
the financial services industry deliberately labels as "sub-prime" borrowers waiting to be taken advantage
of.
• They have almost unlimited legal resources. If you had the financial resources to have effective
legal representation and the documentation to challenge them, they would turn their attention to easier
targets. Of course, because most sub-prime borrowers are not well off and don’t have an attorney, you’
re a likely target.
• They have leverage and information and will prey on your fears. The fear of possibly losing your
home is the key that unlocks your bank account for them. They know almost everything about you
financially and even from an employment and income basis. They are made aware of your inquiries into
other lenders about refinancing even without a request for a payoff and that shopping may lead them to
target you before you can get out of the loan you’re in.
• They are experts with millions of successful cases behind them. The loan servicing industry,
including those who founded and are running the servicing scam companies, helped craft the "standard"
loan documents in widespread use. They are written entirely for the protection of the lending industry,
not the consumer. That situation allows them to manipulate their processes and procedures to push you
into a position where they can take funds from you or ultimately take your home, often within the terms
and conditions of the loan. Some do go beyond the terms or even break the law and aren’t stopped
because the borrower does not actually understand the agreement they signed or the laws and
regulations.



When the servicer decides to manipulate the date the payment is received in order to
artificially create a late payment.


When the servicer applies part of the payment to something other than principal and interest
and creates a partial late payment or deficiency.


When the servicer decides to "force place" an insurance policy on the property by claiming the
homeowner has not provided proof of insurance.

When the servicer pays your property taxes late, then adds their late penalty to your account
without your knowledge.

Any or all of those processes result in at least one month of the account being past due and a negative
note is made in the credit report (which effectively prevents the borrower from refinancing). It also helps
the Private Mortgage Insurance carrier keep the policy in effect on the loan, which is why these
insurance companies have investments in servicing companies in the first place – a late payment or two
allows the lender to keep the insurance in force.



IF the borrower has anything more than about 10-15% equity in the property, it is to the servicer’s
advantage at this point to not aggressively attempt to collect. In fact, if the borrower makes contact, the
servicer will engage in delay tactics to avoid resolving the problem in time to prevent default. If the
equity position is considerably less than 10%, the servicer does not have as much leverage, nor is the
opportunity as great and they will typically be more aggressive in collection efforts and more willing to
keep the loan in force.



In the case of force-placed insurance, it is to the servicer’s advantage to ignore the borrower and any
proof of insurance as long as possible, again to keep the borrower’s credit status in a negative light and
to maintain their relationship with the insurer they contract with. These policies are extremely profitable
because they provide absolutely no coverage for the homeowner. They protect ONLY the value of the
loan if the property is destroyed.



If the servicer has analyzed the opportunity and marked the property for default and recovery, the next
payment received will be rejected as being insufficient. If it is accepted, the application of the funds
leaves the loan sixty days past due. Typically, the scam now moves toward formal legal notice of
acceleration in order to coerce the borrower into signing a highly-profitable forbearance agreement to
somehow "save the home." The servicer rolls thousands of dollars in penalties and an incomprehensible
combination of legitimate and illegitimate fees into the agreement and the homeowner is left with no
choice but to sign it or lose their home. The amount demanded will be calculated to take as much of the
homeowner’s equity as possible.



If the homeowner decides to sell the property to get out of the situation and take their equity, they will
find the payoff amount (which in the last month of the scam will take longer to get than the amount of
time left before foreclosure) strips them of their equity. That combined with their artificially-damaged
credit rating helps keep the victim trapped.



If the borrower cannot pay the amounts demanded in the forbearance agreement, the servicer will have
one of their network of specialized attorney firms foreclose and the property will be sold, typically at a
county auction or through their real-estate network.



If the borrower signs the agreement, they will soon be recycled through the process with yet more late
payments and fees. But in the terms of the forbearance agreement, they may find they have signed
away any legal protections they may have already had, including the right to sue the servicer for fraud or
misrepresentation.



In the end, if the homeowner cannot afford competent legal representation to stop this fraud, they lose
their equity and in many cases, their home.