Janesville50.3°

Be a smart consumer when buying property

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Mike Heine
February 28, 2008

Delavan attorney Jeff Hahn has worked for months trying to get a handful of his clients’ credit back in order after they were caught up in a mortgage fraud scheme.


The scheme, which included bogus sales of 18 Walworth County properties, relied heavily on straw buyers and stolen identities.


Most of Hahn’s clients did not speak English and did not have a firm grasp of the real estate industry.


“The ones that did sign paperwork were told they were doing something else,” Hahn said. “Others were told they would be paid $500 cash if they just showed up and signed documents and pretended they didn’t speak English ...”


“There are people who went into these mortgage brokers and got their Social Security numbers lifted. There are others who signed paperwork and were told they weren’t buying a house. They were told they were just applying for a loan at the title company. They weren’t told they were (actually) buying a house.”


The scheme was elaborate. After years of investigation, federal prosecutors still don’t know how much the banks were swindled and how much the victims lost.


Three suspects have signed plea agreements and are awaiting sentencing.


While they bide, the victims in the case anticipate having their names cleared. Several of Hahn’s clients were duped into unknowingly buying homes and later were forced into foreclosure.


“It has been really bad for them,” Hahn said. “Their credit has been ruined. We put a lot of work into rebuilding their credit and explaining what is going on, and to get these foreclosures taken care of.


“I’ve spent a lot of time with the FBI and bank attorneys trying to get it all straightened out.”


Avoiding fraud

While home buying is complicated, you can find easy ways to avoid illegal—and even legal—traps into which realtors, lenders and brokers coax you to pay more.


Rule No. 1 should be “referral, referral, referral,” said Mark Zugay, branch manager and loan officer of Premier Mortgage Funding in Janesville.


“Don’t necessarily just pull somebody out of the Yellow Pages. Network and find people doing the best jobs.”


Another good rule is to skip the “free lunch” seeking.


“Generally speaking, if it sounds too good to be true, it probably is,” Zugay said.


Advertisements will offer no upfront or closing costs, but you can bet those fees are built in elsewhere, Zugay said.


“Someone has to get paid somewhere down the line,” he said. “Find someone who doesn’t play a ball-and-shell game and doesn’t hide the costs.”


Avoiding fraud has become easier by default since the bottom fell out from under the housing market last year, Zugay said.


About 70 percent of mortgage bankers and brokers didn’t renew their licenses, leaving mostly reputable companies as the lone places to turn to, he said.


“Those were the guys that were here for a quick buck,” Zugay said of companies that showed up during boom years and disappeared. “As soon as the road started getting rough, they all walked away.”


Delavan Realtor Kevin Hibl agreed.


“They’re drying up pretty well,” Hibl said. “There are a lot of good lenders left—your traditional banks and credit unions—that are able to sustain (a market slowdown).


“Mortgage companies ... a lot of those, as fast as they’ve come into the market, they’ve gone out. That’s good for consumers. What they were doing wasn’t necessarily in the consumer’s best interest.”


If you’ve latched onto a broker, banker, Realtor or appraiser who might be shady, it’s OK to be suspicious, said Travis Egan, a mortgage lender for Community Bank CBD in Delavan. Err on the side of caution.


“If you feel pressured, or if you feel like you’re being pressured, that’s maybe a (bad) sign,” he said. “I don’t think anything we do there should be additional pressures.”


Sometimes when the market is competitive, as it is today, some people are going to pressure to get deals done, Egan said. Don’t give in and get backed into a bad deal.


“One of the things I strongly encourage is to get a second opinion,” he said. “It’s good to reaffirm your belief that the person you chose is the right one.”


Nobody in the real estate business should be offended by that, he said.


“Anyone worth their salt will accept talking and building a relationship with someone. That’s what we do. That’s what our M-O is,” Egan said.


And of course, be diligent, Zugay said. Keep asking questions.


While it might seem silly to question the name on an application, for example, that could have saved some from schemers. And those kinds of questions could save you, too.


Mortgage Fraud Prevention Measures

-- Get referrals for real estate and mortgage professionals.


-- Check licenses of industry professionals with state, county or city regulator agencies.


-- Be wary of outrageous promises, such as big profits in short periods of time.


-- Compare comparable sales and tax data in the area.


-- Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.


-- Double-check that the name on the application is your name.


-- Check a home’s title history to see if it has been “flipped,” or sold often in a short period of time.


-- Know and understand all terms of your mortgage. Check it against loan documents. Have it explained to you.


-- Never sign any loan documents that have blanks.


-- Get a second opinion or hire an attorney to help you go over documents.


Sources: FBI Financial Crimes Report 2005, Attorney Jeff Hahn, Premier Mortgage Funding Branch Manager and Loan Officer Mark Zugay.

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