Scam cheats borrowers out of loan payments

WASHINGTON – June 21, 2011 – A new scam cropping up across the country is cheating some homeowners out of one, two or more monthly mortgage payments.

The Chicago Tribune referred to it as the “handoff rip-off” scheme. In the scam, mortgage holders receive a letter telling them that a new company has assumed the management of their loans and that they must start making mortgage payments to the new company.

Many homeowners aren’t familiar with the rules when it comes to mortgage-servicing transfers, so they follow the letter’s directions and send payments to the new company, which could cost them thousands of dollars.

Homeowners should understand the mortgage-service transfer rules so they won’t be duped. For example, a company that provides a mortgage on behalf of a loan’s owner must send a “goodbye” letter notifying them that, on a specific date, their payment should be sent to a new company. Then, a week or so later, the homeowner must receive a second letter from the new servicer that provides the mortgage payment information (their principal, interest, and escrow).

Both letters should include the homeowner’s loan number.

When in doubt, homeowners should contact their original mortgage servicer to find out if the letter is legit or fraud.

The scheme “works for maybe two months” because that is usually how long it takes for borrowers to realize they’ve been tricked, says Becky Walzak, a loan-quality assurance expert. “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.”

Source: “Home Owners, Beware of ‘Handoff Rip-Off’ Scheme,” Chicago Tribune (June 19, 2011)

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