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Tom Kelly: Scammers seem to target seniors during tough times

When times are tough, scammers seem to come out of the woodwork.

The bad guys arrived during the mortgage meltdown of 2008, promising to cure home-loan debt for a tiny commission. Now, with COVID-19 ravaging the country in a variety of ways, the shady operators are back in many sectors, from sketchy medicines to fraudulent loan assistance.

The Federal Trade Commission cautions consumers to be on the lookout for deals that seem too good to be true in debt relief. Some companies offering debt settlement programs may not deliver on their promises, like their “guarantees” to settle all your credit card debts for 30% to 60% of the amount you owe. Other companies may try to collect their fees from you before they settle any of your debts.

The FTC’s Telemarketing Sales Rule prohibits companies that sell debt settlement and other debt relief services on the phone for a fee charged before they settle or reduce your debt. Some companies may not explain the risks associated with their programs, including that most of their clients drop out without settling their debts, that their clients’ credit reports may suffer or that debt collectors may continue to call them.

Like the coronavirus, crooks tend to target seniors. That has not changed in real estate. For example, during the mortgage meltdown that occurred a decade ago, scammers were involved in foreclosure-rescue schemes, loan-modification stings and in just about every conceivable angle of “equity skimming” that wipes out any remaining positive dollars in a person’s home.

What makes the practice of equity skimming so cruel is that it typically happens to older people desperate to sell their home and move to a smaller space or a facility that will better accommodate their needs. The dwindling value of their home often is their only asset.

One of the challenges with equity skimming and other forms of criminal fraud is that it is difficult to prove in court. In most cases, intent to defraud must be proven to be present at the time the deal was made.

One purchasing scheme, sometimes referred to as basic rent skimming, involves older homeowners who need to sell, can’t find buyers and attempt to move on by deeding the property to an investor who would assume the payments on the original loan. The investor then rents the property and never makes payments on the loans. When the lender eventually begins foreclosure proceedings, the original owner is targeted because the investor never paid the loans. The investor pockets the rent money or the down payment or security deposit. While due-on-sale clauses have curtailed the practice, random incidents still are being reported.

Some states have introduced legislation that deals specifically with equity skimming, making such acts punishable as a felony, not unlike securities fraud. Securities fraud is regulated somewhat differently than criminal fraud. Prosecutors believe securities violations are easier to prove because a person does not have to affirmatively lie in order to be criminally liable for his or her actions. Simply not providing full disclosure could be a violation.

Other states, however, have not been as vigilant on equity skimmers. Scammers land there because there’s not much to lose – present laws haven’t put them in jail, and financial penalties haven’t served as much of a deterrent.

Most foreclosures occur only when a major problem has hit the borrower – serious injury, divorce, loss of job, etc. Credit checks and qualification procedures were designed to sort out those capable of assuming the responsibilities of a home loan.

Some foreclosures, however, have been sparked by the deliberate actions of fast-talking salespersons not associated with established banks, savings and loans or insurance companies. Typically, their aim is to take the equity out of a seller’s home, a residence owned free and clear by an older person.

When times are tough, they are tougher on older folks.

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