Earlier this month, Nassau District Attorney Kathleen Rice (seen here) announced the largest "takedown" of a mortgage fraud ring, which led to the arrests of 17 people but not before $20 million was allegedly scammed out of banks and homeowners.
One question that still lingers is whether some homeowners knew they were part of a fraud operation, especially when scammers allegedly negotiated with some sellers to buy the houses for higher than the asking price. Once the scammers got the mortgages from the bank, they let the property fall into foreclosure, authorities said.
For homeowners who don't want to be scammed and possibly charged with fraud, Newsday posed some questions to assistant district attorney Abigail Margulies, who heads the crimes against real estate unit and directed the investigation.
Q: What signs of a scam should a seller watch for when a buyer makes an offer?
A: As with any financial transaction, a homeowner should use common sense: If it sounds too good to be true, it probably is. For instance if a buyer offers to pay more than the list price, maybe you've hit the lottery -- or maybe you're being scammed.
In a house sale, a seller needs to be aware of the potential to be scammed and arm themselves with good defenses:
- Have your own attorney. You need to have an attorney who is independent of the buyer and watching out for your interests.
- Be knowledgeable about the details. Read the contract. Know what the sale price is. Be aware of whether the contract terms include a down payment. If the contract says that you are owed a down payment, make sure that you receive it. Some scammers will try to get more money from the bank by making it look like there is a down payment when there really is not; this is a fraud.
- Ask questions. Most of the time, a buyer contacts a seller if a house is on the market, either directly or through a Realtor or an attorney. Be cautious if you are contacted by a third party instead, who claims that he or she can arrange for a buyer for your property. That third party might be trying to make a quick profit by selling your home to a straw buyer.
Q: If the sellers think the buyer is part of a scam, what should they do at that moment and later?
A: If you believe that the buyer is committing a fraud and you sell your home anyway, you run the risk of being prosecuted criminally or sued civilly. Consult with an attorney familiar with real estate matters. Your attorney should be watching out for your interests. If you and the attorney suspect a scam, contact your local district attorney's office.
A: Scammers like to prey on vulnerable individuals whose identities they can steal. Once scammers have used your identity to purchase or take out a mortgage on your home, it can be a long and arduous process to correct the damage that been inflicted. Often, it takes many months to even become aware of the fact that your identity has been stolen at all. Once you are aware of the theft, it can take many more months to convince the lender that you did not sell or buy the property. It may also be difficult to get the property back if it has been sold to a good-faith buyer, who is not eager to relinquish his or her own claims on the property.
And in any event, your efforts to undo the transaction will likely involve lengthy litigation, which can be extremely costly. However, the district attorney's office will make every effort to apprehend the scammers and, upon a conviction, will seek appropriate restitution.
Most importantly, do what you can to prevent your identity from being stolen: Order your credit report every four months (stagger annual requests to each of the three credit bureaus so that your requests are spaced out in four-month increments); order a credit report well in advance of any intended home purchase, so that you have sufficient time to correct any problems; freeze your credit report to prevent new loans from being issued without your permission; and protect your Social Security number by not carrying it in your wallet and only giving it out when absolutely necessary (as when filing taxes or other government forms).