Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Firms profit off Florida homeowner defaults

 

Palm Beach Post

Joshua Rand is the muscle. Not in a busting-skulls, Tony Soprano kind of way.

But he does seek to collect, and sometimes even buys, the debt left by delinquent homeowners who walk away from their mortgages -- the same borrowers who often assume that a foreclosure or short sale wipes out their loan balance, ending their liability.

A principal in the New York-based Deficiency Judgment Recovery Network, Rand said he has ``hundreds, maybe thousands'' of home loans gone sour in Florida that his company, formed in late 2009, is working to collect balances from.

Rand either is hired by lenders to collect the deficiencies for them or his company buys the debt in pools for pennies on the dollar, profiting on the back end by making a borrower pay up.

``People are under the assumption that the banks are so busy modifying home loans that they don't have the bandwidth or stomach to go after those who are walking away. That's a bad assumption,'' said Rand, whose company motto is ``We turn shortfalls into windfalls.''

A deficiency judgment, or claim, is basically the remainder owed on a home loan when a borrower goes into foreclosure or completes a short sale.

Before the real estate crash, there were relatively few foreclosures and even fewer short sales, so deficiencies were rare.

Now, tens of thousands of defaulted home loans are on bank records. But mired in busted properties, banks still have been unlikely to pursue claims, attorneys say.

That's where the Deficiency Judgment Recovery Network comes in.

In fact, some predict a cottage industry of entrepreneurs will start buying up the delinquencies to pursue the balances on their own.

``These lawyer firms are salivating. They can't wait because they see huge opportunities to collect money,'' said Mark Greene, owner and president of Short Sale Operations in North Palm Beach.

``It's going to be a blood bath.''

The idea is similar to companies that buy credit card debt and attempt to collect, except homeowners are more attractive targets than credit card holders, said Orlando attorney Jonathan Alper, who specializes in foreclosure and bankruptcy law.

``At some point, the homeowner probably had money, whereas with a credit card claim, they may never have had money,'' Alper said.

In 2009, Florida courts handled 398,825 foreclosures. An unknown number of short sales has upped the ante for banks even more.

By the end of this year, the Irvine, Calif.-based company Realty Trac predicts 3.5 million more foreclosures nationwide.

``I'm not surprised someone figured out how to make money off it,'' said Chris McCarty, director of survey research at the University of Florida's Bureau of Economic and Business Research. ``There had to be some kind of push back.''

States differ on how long lenders have to pursue a deficiency, ranging from a few months to several years.

In Florida, a claim must be filed within five years, but the lender has up to 20 years to collect.

So even if a borrower has no money today, he or she may rebound within the collection time frame.

``People are broke right now, but they won't be broke forever,'' Greene said.

Rand said his company isn't going after people who lost their homes because of unemployment, illness or other hardships.

Loans receive careful review. Only people who can afford to pay but have decided to stop are pursued, Rand said.

Walkaways, also called strategic defaults, are believed to be on the rise as property values remain low and borrowers continue to owe more on the loan than the home is worth.

``The fact of the matter is we have to find some way out of this and those who need help should get it, but there are those who are gaming the system,'' Rand said. ``There has to be some level of accountability. It just can't be a free-for-all.''

The Miami Herald




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