Mortgage Borrowers Should Be on the Lookout for Fraud
    
  Whenever money and property are involved, you'll find many people ready to participate. There are a few to watch out for as you purchase or finance your home. Especially beware of so called "credit doctors." For a substantial fee, many of them promise to "repair" blemished credit reports so that they will show up as clean records when requested by a mortgage broker or lender. The truth, however, is that this is generally a fraud. In some instances, actions taken by those claiming they can fix a person's credit report can put the borrower in danger of criminal prosecution.

First of all, if there are real errors on your credit report, you can correct them yourself by requesting that the involved credit reporting agency verify the entries in your file. If an entry is incorrect, the law requires that it be deleted immediately. Secondly, if your report contains genuinely harmful information, a "credit doctor" can do little to assist you legally. Only time, together with good performance by you on paying your obligations, will cure the problem.

Illegal strategies are often proposed by "credit doctors." Such strategies can lead to real trouble for the borrower, because they constitute fraud that can and will be prosecuted under criminal statutes if detected. One such strategy involves a trick of temporarily deleting a bankruptcy from the borrower's credit report. Although petitions for bankruptcy are usually filed in a local court, they are actually dealt with in the region's federal court. This is because the bankruptcy statutes are federal laws. In a fraudulent bankruptcy scheme the "credit doctor," acting as the borrower's representative, contacts the local court where the bankruptcy was filed. He requests that the bankruptcy file be obtained from the federal court so he can review it. The file is therefore removed from the federal court and sent to the local court. Then the borrower is notified of its receipt by the local court. The file will be held at the local court, pending review, for 15 to 30 days

While the bankruptcy petition is not on file at the federal courthouse, the "credit doctor" challenges the bankruptcy reported on his victim's credit report. Then the reporting agencies, when the federal court clerk is unable to find the bankruptcy file, must delete the bankruptcy from the court records, and it disappears from the credit report.

The loan then goes through, and now, having committed fraud, the borrower is in great danger. The lender will often conduct a post closing "quality control" review which includes a recheck of credit. The bankruptcy file is then back in federal court, and it reappears on the credit report because the reporting agencies automatically update public records periodically. When the court discovers what has happened, the borrower may lose his house, his freedom, and what remains of his reputation. These consequences are both disastrous and tragic.

"Credit doctors" may also suggest that a person get a new social security number and charge a fee to obtain one for the borrower. To use a new social security number to build a new credit report is not only illegal, but it is also ineffective. If a borrower is around 40 years of age, and has only a six month or one year credit history, an immediate red flag is raised in the lender's mind. There is little doubt that a name and address cross check will be made, and the old number, along with the questionable credit report will surface, leaving the borrower worse off than before. In fact, the borrower may be charged with fraud or intent to defraud the lender.

The "credit doctors" are rarely prosecuted because of their false advice. The actual act was committed by the potential borrower, and therefore he may go to jail while the "credit doctor" goes in search of new victims. It is very important to remember that there is nothing legal that a "credit doctor" can do that the borrower cannot do for himself. Also, a totally clean credit record is not needed to obtain a mortgage. If credit problems exist, a frank and open discussion with either one's mortgage broker or lender is the best way to resolve the issues. Lenders want to make loans, and they will work with prospective borrowers to put together a loan program.

"Credit doctors" are not the only ones who propose unacceptable solutions to homeowner problems. There are those who work to take advantage of older homeowners by targeting them to "steal" a few of their mortgage payments. A notice on an official looking letter is sent informing them that their loan has been sold and instructing them to send their payments to a new address. By the time people realize the new instructions are incorrect, the person "stealing" the mortgage payments has likely fled the scene with a considerable sum of money.

Dan Garret of the California Department of Real Estate claims that "federal law now requires letters from both the old lender and the new one, which has cut into this racket." He goes on to add that "many homeowners don't know that" and may still be victimized. Homeowners receiving such letters should always contact their current lender to check that the loan has in fact been sold or transferred, before they make payments to any new person or location.

Unacceptable and illegal solutions to homeowners problems will undoubtedly continue to exist. The best protection that you can have is to never let your guard down. Look at all papers carefully, and if anything raises a question or seems suspicious, check it out. It will definitely be worth your time and effort.