Viral Fraud: More Deed Crime Targets in the Coronavirus Economy

Well-known schemes are being repackaged for the time of COVID-19. Here’s an overview of how real estate fraudsters are approaching their targets — and how to avoid becoming one.

Image of an open lock hanging on a closed door latch.

Scams flare up during natural disasters and financial crises, so we can expect a spike in deed fraud in 2020 and beyond. Battered by the pandemic, facing snowballing debts and possible defaults, many people are now considering risks they would have rejected in the past. Deed fraudsters can be counted on in times like these to aggressively seek new opportunities.

Any wiring directions or changes to money transfer requests over the phone or by email should arouse suspicion today. Rather than act or answer, recipients should call the company and deal with a real person. And rather than use phone numbers supplied in messages, recipients should take the extra step of visiting the company’s website, copying the published number, and calling that number. Personal details should be volunteered only after the identity of the party making the request if verified, or by physically going to the company’s office.

Of course, COVID-19 itself is making in-person meetings less possible or at least less palatable. Part of the fraud risk involves the way online transmission of our personal and financial data can be so easily and rapidly handled.   

Doing Business Online: Special Caution Needed

Real estate deals are becoming more convenient for buyers and sellers alike, as transactions move online. County recording offices, to varying degrees, have continued to support and facilitate deed filings through the pandemic. New York made remote notarization possible through an executive order — expressly to address the coronavirus lockdown.

The shift to online transactions, helpful as it is, also opens new fraud vectors. If a deed can’t immediately be recorded at the close of a transaction, for example, there’s a temporary gap in the public record that scammers can exploit to resell a house. And duplicity in the online market is all too common. Some scammers go so far as to lift images and property descriptions from real estate sites, then pretend to be legitimate sellers.

Melissa Pippin-Carson and Roger Carson, who have both served as officers for the Santa Fe Association of Realtors, relay the story of an online home sale in which the scam artist was the buyer. To close on the New Mexico property, the buyer sent a cashier’s check, which happened to be written out for a $20,000 surplus over the agreed-upon price. The title company found the mistake, and wired the excess payment back to the buyer. The $20,000 ended up at a closed bank account with no available contact information. The cashier’s check turned out to be fraudulent.

Voiding Fraudulent Deed Transfers

In one form of ongoing deed fraud, amounting to hundreds of cases a year, distressed property “consultants” seek out people facing financial setbacks, offering to help them modify the terms of their mortgage loans. Some owners inadvertently sign their home deeds over to these “mortgage relief” specialists. The homeowner may believe assurances that the consultant will take care of the mortgage payments and the homeowner’s credit rating will improve if the owner would just transfer the deed temporarily, and stay in the house as a renter for a few months. The scammer’s intent is to evict the swindled owners and keep their deeds.

Of course, the people who hand over their deeds under pressure are rarely in the position to hire lawyers and go to court to have an ill-gotten deed voided.

This is why New York enacted a deed theft bill in 2019. Now, when the District Attorney’s office convicts a swindler, the DA can also have the fraudulent deed voided, to help make ripped-off owners whole again. The new bill also toughens New York’s Home Equity Theft Prevention Act by:

  • Prohibiting harassment as well as deceptive statements suggesting the consultant works with a government or police agency.
  • Disallowing temporary transfers of deeds.
  • Banning upfront charges, to stop bad actors from taking the fees and vanishing.

Struggling homeowners should be wary of foreclosure prevention “auditors” or consultants who purport to represent law firms or the homeowner’s mortgage servicer. They should carefully verify such claims and report them when they’re false. The New York attorney general urges targets of deceit and deed fraud to file official complaints.

Pro tip: Demands for upfront payments are signals that something is wrong. At the federal level, Regulation O bars consultants from charging a homeowner unless and until the homeowner actually receives and agrees to an offer of relief from the mortgage lender.

Coronavirus-Driven Real Estate Ploys to Avoid

The North American Securities Administrators Association (NASAA) notes the existence of scams that exploit fear caused by the stock market’s volatility to promote “safe” investments, from precious metals to real property. Some of these promotions target seniors by claiming they can offer recession-proof retirement portfolios or guarantee recovery of profits in an IRA. Advertisements for “buy low” investment offerings have strong appeal now, when people feel driven to make up for virus-related financial losses.

Other scams may involve sales of discounted properties, or shares in properties, with assurances that buyers will reap profits when the housing sector rebounds. Watch for people selling courses on buying houses in a recession, with a view to selling them for top dollar in a market revival that no one can time. The Federal National Mortgage Association (Fannie Mae) urges people to work with reputable real estate agents when buying and selling real estate, and to take the necessary time to understand the paperwork before signing any deed or agreement.

There are also the deceptive mortgage offers that skip any meaningful vetting of the borrower’s credit, offering low-interest mortgages but switching them out for loans with higher rates later. To some extent, the federal moratorium on foreclosures of FHA-insured mortgages will curb desperate mortgage decisions. Banks began announcing they would suspend foreclosures in March 2020, and by April 6% of mortgages were on pause, thanks to forbearance plans. Then again, this means homeowners are racking up months of debt. A steadily growing population of financially insecure people adds up to a lot of low-hanging fruit for the fraudsters who feed on fear. 

Pro tip: Before engaging anyone’s help to manage loan debts, check with your existing mortgage company. A mortgage company wants to avoid defaults, and may modify the terms of a loan. 

How Con Artists Make Contact

The Federal Home Loan Mortgage Corporation (Freddie Mac) recommends not giving out sensitive information in response to a phone call or email. Red flags include misspellings, suspicious links, and contacts coming from actors you don’t already work with but who are requesting your personal details. These messages are data harvesting ploys. Some contain malware that can be deployed by hackers and thieves.

Sometimes there are no red flags. Fake messages and emails can appear to be coming from Freddie Mac or some agency of the government. If someone is advertising a mortgage or refinancing product over the phone, steer clear. And if the caller claims to work with or for Freddie Mac, report the call.

Freddie Mac further notes reasons to distrust caller ID. Scammers can “spoof” numbers to make incoming calls appear to be from a local or known caller. Robocalls can spell trouble, too. The best practice is to avoid pressing any numbers, and to let these callers simply leave a voicemail. Rather than use the numbers in texts and emails, it’s a good habit to call companies back through the number on their official websites, to avoid identity theft.

Be just as wary of contact over social media or offers on websites. Sometimes, a company checks out perfectly well on the internet, and even has glowing reviews. It’s best not to take a set of close-to-perfect reviews at face value automatically. It’s not unheard of for reviewers to be pressed into removing negative reviews.

If you’re dealing with fraud in the course of the COVID-19 pandemic, there are actions you can take:

  • Stop responding to the scammer.
  • Call your financial institutions and any online payment services you have used, and alert them to the security breach.
  • Change your passwords.

Depending on the nature of the fraud, key contacts for reporting it include:

Reporting fraud helps keep everyone safer.

The bottom line? Just as there is no miracle cure for COVID-19, there is no magic wand to undo the economic damage it has inflicted on so many small investors and innocent homeowners. Now, more than ever, it’s important to be on the lookout for overhyped opportunities and quick recovery fixes.

Photo credit: iMattSmart, via Unsplash.