An old mortgage scam re-appears

A simple scam aimed at hijacking just one or two mortgage payments from unwary homeowners is making the rounds once again. With continued consolidation in the mortgage industry borrowers can quickly become a victim and not even realize it for several months.

The scheme works like this: Con artists send letters telling borrowers that they should begin sending their payments to a fictitious company that has assumed the management of their loans. By the time borrowers who fall for the fake transfer find out they’ve been had, they’re out one or possibly two payments plus whatever damage is done to their credit report for being late on their mortgage payment.

Lenders and borrowers are being fleeced out of billions in much more elaborate ruses than this simple one. But if you are an owner who falls for the letter, a couple of house payments can put a serious dent in your pocketbook and could start you down the path of foreclosure.

The ploy works because most borrowers don’t know the rules when it comes to the transfer of mortgage-servicing rights. Under the law, the current servicer — the company that administers your mortgage on behalf of the loan’s owner — is required to send you a goodbye letter notifying you that as of such-and-such a date, your payment should be sent to a new company.

A week or so later, the law says you should receive a second letter, this one a welcome missive from the new servicer telling you what your payment is and the breakdown among principal, interest and escrow. This package also is likely to include a few payment coupons, if not a brand-new coupon book, and self-addressed printed envelopes so you can make your payments.

Both letters should include your loan number. If they don’t or if the information included in one doesn’t match what’s in the other, you should call your original servicer to find out what’s up. If you receive only one letter, alarm bells should ring. But even if everything seems fine, it would be wise 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 not among the most reported types of mortgage fraud, so it is probably sliding under the radar of most law enforcement agencies.

The maneuver “works for maybe two months” because it takes that long for borrowers to realize they’ve been had.  Also, by that time the current Lender has notified the borrower of a missed payment.

When the real servicer calls to tell the borrower the first payment hasn’t been received 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.