Foreclosure Scams Rampant in Florida
A Florida man was recently sentenced to 26 years in prison for foreclosure and short sale fraud. John Lebron, 33, was convicted last week of setting up a complex scheme to buy and sell foreclosed houses, make money on each part of the deal, and default on the loans. He is hardly alone among foreclosure offenders.
Florida is known as the nation’s capital in foreclosure fraud. The state was among the hardest hit by the collapse of the housing bubble and subsequently has seen countless homeowners who can’t make their mortgage payments. In the first quarter of this year alone, one in every 104 houses in the state received a foreclosure notice for a total of 85,671, a rate three times the national average, according market research firm RealtyTrac.
Of the top ten metro areas in the country with the highest foreclosure rates, seven are in Florida, led by the Miami area at number one. The state projects that it will process over a million foreclosure cases in the next four years, according to the Palm Beach Press. And a lot of foreclosures means a lot of opportunities for scams.
Lebron’s scheme involved a complicated house-flopping maneuver using straw purchasers to rip off the banks. However, many of the foreclosure scams out there are aimed directly at distressed homeowners, attempts to wring out what little cash they can come up with or steal the houses outright.
How can you avoid getting caught up in a scam? Homeowners subjected to foreclosure proceedings are likely to be deluged with mail and phone calls from attorneys and companies offering to help out. Anyone facing foreclosure really should engage an attorney, but the trick is to make sure it’s someone reputable.
“The folks you really have to watch out for are the ones who are heavily advertising on the Internet or television,” says Roy D. Oppenheim, founder of real estate firm Oppenheim Law in Florida. “The acquisition cost of clients is so high that they are more of a marketing operation than legal service.”
Shady ventures could acquire hundreds or thousands of clients with only a contracted lawyer or two to handle all of the cases, meaning the firm will likely be of little help even if it isn’t running an outright scam. Beware of organizations promising to save your house or clear your mortgage for free, and avoid out-of-state firms. “Foreclosure defense is a local practice,” says Oppenheim. “You need a relationship with judges, and with the opposing counsel. How will a lawyer from Los Angeles represent someone in Florida?”
To perform due diligence and vet your attorney, check out the ratings on websites like Martindale.com, or call up the state bar association to see if there have been complaints registered.”Word of mouth still works, speaking with friends, or people in the neighborhood,” Oppenheim says. “Choose the same way you would choose a stock broker or doctor.”
Too Good to be True
An attorney will guide homeowners through the process and help achieve the best possible outcome, be it a short sale, a deed in lieu of foreclosure, a loan modification or refinance or even a fight over the validity of the foreclosure. One point that shouldn’t be lost is that a good attorney under the right circumstances can actually achieve a “too good to be true” outcome.
The foreclosing entity may not actually possess the loan agreement, or may have improperly robosigned the foreclosure without ensuring it was valid. In Florida, there is a statute of limitations of five years on foreclosures, so once delays start coming in and the bank’s standing is challenged there is a chance that homeowners could get off scot-free. “Should the statute run out, you are in a position where you can have the note and mortgage voided. When that happens, you may end up with never having to pay the mortgage back,” says Oppenheim. “I tell my clients it’s like winning the lottery.”
Understand that a voided mortgage is a slim possibility, but watch out for disreputable companies that promise a free house from the get-go without knowing any of the individual circumstances of a foreclosure. “If they start making too many promises, I would head for the hills,” the attorney says. “Put my hand on my wallet and run.”