The housing market in the United States may not be thriving, but business is booming for foreclosure rescue and loan modification scammers.

The US Government Accountability Office (GAO) released a report in July 2010 entitled “Home Ownership Preservation”.  It says that: “The current foreclosure crisis has provided persons who may perpetrate mortgage foreclosure rescue and loan modification schemes with unprecedented opportunities to profit from homeowners desperate to save their homes. In March 2010, we reported that national default and foreclosure rates rose sharply from 2005 through 2009, to the highest level in 29 years. The most recent data from the Mortgage Bankers Association, which are for the first quarter of 2010, show that the number of home loans with payments more than 60 days past due, and therefore potentially facing foreclosure, is 2.7 million.”

The GAO report says there are two main types of foreclosure rescue and loan modification scams: advance-fee loan modification schemes and sales-leaseback schemes, with advance-fee schemes being the most common.  In an advance-fee scheme, someone charges you a fee in advance to negotiate a deal with your mortgage lender.  They may even offer a money-back guarantee.  But the usual outcome is that they take your money (the average is about $3,000), provide little or no service, and then refuse to refund the fee.  In a sales-leaseback scheme, the scammer persuades you to transfer your deed to them by offering to assume your payments and let you pay rent while you get your affairs in order.  They promise to sell the (more…)

Better Business Bureau has received several complaints over the last few weeks, from consumers across the country, inquiring about a company identified as First National Financial Corp., allegedly located on Grand River Avenue in Brighton, Michigan. Consumers are informing BBB that they have been approved for a secured loan of $30,000.00 at a 7% interest rate with a required collateral deposit of $1,210.00, which is to be wired to Ontario, Canada in order to receive their loan.

The Michigan Office of Financial & Insurance Services has informed BBB that First National Financial Corp. is not an active Michigan corporation and that it does not have a valid license to provide lending and financial services in Michigan.  The address provided is that of a former location for 1^st Financial Lending which is a legitimate Michigan corporation located in Troy, MI. 1^st Financial Lending alerted the BBB to the use of their address and has no affiliation to the fraudulent operation.

BBB’s report on First National Financial Corp. is being revised to reflect BBB’s current investigation.

Recent BBB investigations reveal an increase in bogus loan brokers who are impersonating legitimate lenders. They make illegal use of the names, logos and/or addresses of reputable financial institutions or organizations that have no affiliation or connection with the fraudulent operation.

Warning signs that a “lender” might be a scammer:

• Pressures you to act immediately.
• “Guaranteed” loans, even if you have bad credit, no credit or a bankruptcy.
• Refuses to provide its street address location. (more…)

According to complaints filed with the Better Business Bureau, victims across the country have lost a total estimated quarter million dollars to advance fee loan scams this spring. Advance fee loan scams target individuals and small business owners who are desperate to get a loan and often take the victim for thousands of dollars.

Despite recent improvements, the economy continues to provide a great opportunity for scammers to take advantage of struggling individuals and small business owners. Lending standards remain stringent at most banks and many cash-strapped individuals are turning to fraudulent lenders that promise loans regardless of your credit history.

“Schemes preying on people looking for loans are not new, and they are flourishing in an economy when so many are struggling to get by,” said Kim States, BBB President. “The complaints received by BBB are only the vocal few and we know from experience that many more people across the country are falling for this scam every day—just when they can least afford it.”

BBB has recently received complaints about advance fee loan scammers operating under more than 75 different names including Capital Alliance Financial Group, Harford Financial Services, Howard and Clark Financial, Lending Hand Financial, among others.

Most people stumble upon the scam online or learn about the bogus loan offer from ads in local Thrifty Nickel publications and online through classified sites like Craigslist. Often, an advance fee loan scam website will be created and taken down within a couple weeks only to be replaced by another operating under a different name and fake business address.

The websites look professional and might even put the victim through the rigors of filling out loan application forms—often requiring the victim’s bank account and Social Security numbers. Eventually victims are told they are approved for the loan and just need to pay as much as thousands of dollars upfront via money order or wire transfer to pay for insurance or collateral. Those that pay never get the promised loan and are even sometimes tricked into giving the scammers even more money.

BBB advises cash-strapped individuals and small business owners to recognize the red flags of an advance fee loan scam:

• The lender has a bad reputation—or none at all.  Research the lender thoroughly online and with your BBB. Most trustworthy lenders have an established track record; be wary if you can’t find much information about the lender online.

• The lender is not registered in your state to do business. Check with your state financial or banking regulators.

• The lender asks you to wire money or send a money order—such as for insurance or collateral—before you can receive the loan. You might be told to wire money to another country, consider this yet another red flag.

If you’ve become a victim of an advance fee loan scam, contact your local Better Business Bureau and report the incident to your police department.