A bill designed to enable Idaho to readily convert to the national automated licensing system has made its way through the house recently. The state law, which will amend the Idaho Residential Mortgage Practices Act, will authorize the Director of the Idaho Department of Finance to participate in the implementation of a multi-state automated licensing system for mortgage brokers, lenders, and loan originators. Not all states currently require licensing, but many industry regulators are pushing hard for laws in all 50 states.  The multi-state program is being coordinated by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.

Here are some tips, from the National Conusmer Law Center's Foreclosure Report, warning what should NEVER be done as a consumer:

• Don't panic. Get all of the information on the foreclosure process in your state, and how much time you have to resolve your problems before losing your home. Paying special attention to the date that you can lose your legal right to your property is extremely important.
• Never sign a contract under pressure. Take your time to review the paperwork thoroughly, preferably with a lawyer representing your interests only.
• Don't sign away ownership of your property (often referred to as a "quit claim deed") to anyone without advice from your lawyer. Be especially suspicious of offers to take over ownership of your home as part of a deal that will allow you lease or rent the home until you buy it back in a few years. Most buybacks are extremely expensive or nearly impossibly to pay, and most people never get their homes back. (As I think about this form of property theft I'm reminded of the pawn shop concept of jewelry robbery!)
• Beware of any home sale contract where you aren't formally released from liability for your mortgage. Also, make sure you know what rights you're giving up and that you are actually agreeing to give them up.
• Never make a verbal agreement. Get all promises in writing and get full copies.
• Don't sign anything that has blank lines or spaces. Information could later be added that you don't agree to - after you've signed. 
• Don't give in to promises such as the following, often used as ploys to entice consumers into deals which could cost far more than the promised savings:
  - "We'll pay for your closing costs" or "We'll save your credit"
  - "We'll pay your first two months rent or payments in your new home"
  - "You'll get several thousand dollars cash back to use any way you'd like."
  - If you sign the title over to us the foreclosure will be recorded against us, not you."
  - "We'll buy your house 'as is'."
  - "We guarantee we'll find you a buyer in seven to 14 days." (But at what price?)
  - "We'll get you a new mortgage with low monthly payments." (But they don't tell you how much is borrowed or for how many years worth of payments.)
  - "We'll help you file bankruptcy to stop this foreclosure." However, bankruptcy only buys you time to fix the finances, it doesn't stop a foreclosure. If you do this, make sure the person offering to help is a reputable bankruptcy attorney, who really knows what they are doing.)
  - "It may cost you thousands more if your property is sold at a public auction."
  - "We'll give you $40.00 in Free Gas."
  - "We have an interpreter for you." If you do not speak the same language as the "rescuer", bring your own translator, do not depend on the accuracy of the translation of a referred translator. Trust your own.

Here are some signs that one should proceed with caution, or even question the transaction. These can help protect consumers from fraudulent transactions, and help loan officers and mortgage professionals learn to recognize fraud, and even help to educate customers in the event that they need help in the future. Use extreme caution if you are asked by an individual or a company to do any of the following: (This advice comes from the U.S. Trustee Program of the Federal Department of Justice for homeowners facing foreclosure or having trouble paying their mortgage.)

• Calls itself a "mortgage consultant," a "foreclosure service," or anything similar.
• Contacts or advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-to-door.
• Collects a fee before providing services to you.
• Tells you to make your home mortgage payments directly to them instead of to your mortgage lender.
• Tells you to transfer your property deed or title to them.

You should always stay in touch with your mortgage company, and if necessary, contact an attorney WHEN YOU FIRST REALIZE YOU ARE IN TROUBLE. My father, who was an attorney in Los Angeles for very many years would give the same advice. (In fact, he has given me similar advice - contacting someone the moment you realize that you could POTENTIALLY be in trouble, and each time I did not follow that advice, I was in deeper trouble at the last moment than I would have been if I had just communicated. The aftermath is generally worse, too.) So far there have proven to be two key tactics to avoiding not only foreclosure in some cases, but fraudulent transactions robbing you of your equity or your home, or both: communication and education. Sound too hard? The alternative is lose everything you have worked hard to obtain and gain over the past years.

While regulations continue to tighten in some states, others lack the necessary restrictions that would keep out people who are likely to commit crimes in the mortgage industry. Currently Colorado and Alaska are the two remaining lacking industry standards and regulation regarding who can and cannot call themselves a mortgage broker, loan officer, loan originator, etc. Mortgage brokers and loan originators have access to your personal financial information.

These facts should not only make those in the mortgage industry think about writing to their legislators, but homeowners and buyers alike should be alarmed in those states. Chances are, there are more than just a few felons in financial positions that shouldn't be, and stiffer regulations would weed them out, and prevent the likelyhood of fraudulent activity in the business.

7NEWS caught one of them in the act, a four time convicted financial felon, calling himself a mortgage broker in Colorado - Wayne Martin. 7NEWS not only uncovered one of these convicted felons in the mortgage biz, but caught him on tape lying about a few issues. He claimed that he and his company did 400 loans last year, 225 of which he claimed were done by him. When later confronted with the issue he corrected himself saying it was actually around 50. He also said that he has no criminal record, and when asked the second time, said he couldn't recall what his earlier answer had been. While all four of his convictions were prior to his business in mortgage origination, his crimes were financial in nature. Thanks for the story 7NEWS, we need this type of behavior to be brought to the public so that personal and private information can only be accessed by those who are least likely to commit crimes with the information. The more we all know about the matter, the better able we are to create solutions.

Okay, so are you ready for some real life examples? I have looked up a few (I don't personally know anyone who has been through it, or been responsible for it) and hope that they help you - or if anything, pass the word on so that we can help others avoid these financially devastating scams.

Daniel Ebihara, of Las Vegas and staff attorney for Clark County Legal Services in Nevada, recently won a trial on behalf of a young couple who fell victim to fraud. They thought that they had sold their home to avoid foreclosure. When the couple went to go buy a car, they found out that the 30-year mortgage was still theirs. The predatory lender that took advantage of the couple's financial distress, and the couple didn't even know that it had happened.

Ebihara says not only is the situation not a rare occurrence, and does not only happen at the hands of "rescuers" and predatory lenders, I am shocked to find out that it happens also with family members! The elderly are often taken advantage by their own children, who are offering to take care of them for the rest of their life if the parents put them on the mortgage. "As soon as the papers are signed, the kids are kicking their own parents out on the streets. It's horrible." I think if I had not been born and raised in Los Angeles I wouldn't believe that the human race could be so cruel, but I know it is. But there are solutions, signs to look for, and precautions you can take, and in the fraud business - a consumer who is armed with their educated mind and trained eye, is pretty much like a Kung Fu master taking on an unarmed bank robber. The key is educating, it's the best protection you can bring with you in homeownership.

Another widely used foreclosure "rescue" scam includes a variety of techniques, all of which lead to the homeowner surrendering the title to their house, believing that the "rescuer" will be paying the mortgage payments while you remain in the house as a renter, buying it back over the next few years. The homeowner may even be mislead to believe that surrendering the title is necessary in order to enable someone with a better credit rating than the homeowner can obtain a new mortgage in order to prevent the foreclosure. Typically the buyback is near impossible due to the nature of the terms of the deal, and the homeowner suffers permanent loss of the home, and the "rescuer" makes out with either all or most of the home's equity.

This type of fraud is most prevalent in California, Colorado, Massachusetts, New York, Washington, Illinois, and Washington D.C., although it can happen anywhere. Unless you plan on selling the house to another person, you should not be giving title of your house to them. It is a similar scam to the "car title loans" that you may have either heard of or been in. The car title is surrendered to the "loan" company who charges enormous amounts of interest on a loan not more than the car's Blue Book valuation. Most people who take out this type of loan are unable to obtain a traditional loan, and are therefore vulnerable to the scam. Due to unreasonable repayment terms, the borrower is at risk for the repossession of the car by the title loan company. Sound similar to you?

There are several factors that give opportunity to a predatory lender for fraud. Homeowners in financial distress are the most likely to become a victim of this type of fraud, and I'll cover a few of the ways that scams can take place, and the effects it can have on the homeowner.

One of the ways that a homeowner can be defrauded is when a distressed borrower sees an ad or sign that states something such as: "We Buy Homes", "We Buy Houses - Fast Cash" or "Cash For Houses - Any Situation, Any Condition". These companies can charge enormous fees for simple phone calls and paperwork (which could easily be done by the homeowner). Homeowners are often left with little assistance, and little time left to save their home from foreclosure before they even realize it. Many times it keeps the homeowner from seeking qualified help at all because the "rescuer" has given the homeowner a false sense of security. The "rescue" company leaves the homeowner in a situation that may have been prevented with proper intervention. This particular type of fraud runs rampant in New York, Ohio, Michigan, California, and Oklahoma.

The Better Business Bureau (or BBB) can be of some assistance if you need further information on a particular company's reputation. Again, as I mentioned in Part 1 of this series, don't be afraid to call your lender or mortgage servicing company. They may have some referrals to legitimate help, rather than choosing a "rescue" company to help you spiral into foreclosure. Be wary of any company that doesn't offer contact information other than a phone number.

Okay, so foreclosure scams are not something new, but the reason I am bringing them up now - with so many new homeowners stretched beyond their financial means, trillions of dollars in ARMs about to "reset" within the next year or so, there is a great chance that many of those homeowners will fall victim to foreclosure scams. While it may not be news to anyone that the predators are out there - and successfully robbing homeowners of their life savings, their equity, and their houses, it is the duty of all honest consumers and professionals to educate themselves to the tactics that are being used, in order to better protect your clients, and yourselves.

It is important to remember that, like every other crime, you must understand the criminal. Mortgage fraud is no different, and the crime should be understood by those who intend to avoid being a victim. If you feel that your home may be in danger of foreclosure, call the company that services your mortgage first. Let them know exactly what your situation is. Don't be afraid to talk to them about what you can and can't afford, and they may be able to restructure your loan for you if your situation is right for it. Possibly they can offer a temporary solution to help you catch up, or could refer you to a legitimate resource for help. They may not offer any of these solutions, but call them first. It is your first step in avoiding foreclosure.

If you have no other solutions at hand, at least be aware of some of the scams that are out there, and what signs to look for in avoiding a predator. We will explore some of these signs, and the tactics that are used in swindling homeowners out of their equity and their home, and how they can even hold you financially responsible for the mortgage payments.

I was recently asked this question online, and generally speaking - NO, it is not legal. While I will agree that it is practiced widely throughout the U.S., it is generally not legal, and should even be discouraged for several reasons.  Many times, it leads to other forms of fraud, such as inflated appraisals. Whenever a lender is not aware of all of the details of the transaction in writing, or the lender is not informed as to the true nature of the transaction, the transaction is illegal.

First of all, what buyer wouldn't be enticed by the notion of not only avoiding having to come up with cash for the closing costs, but actually receive cash in hand at closing - when most buyers are left nearly broke! Many new homeowners could really use the money towards paying off credit debt or home repairs and renovations.

And what mortgage officer or broker wouldn't be lured into the hope of a bigger commission check? Seems like a win/win situation, but there are actually loosers, and reasons that the government is actually regulating the cash-back scheme. Lenders could be tricked into making risky loan which they may otherwise have avoided. Buyers may end up owing more than they need to borrow, or worse yet, more than the property is worth. Many times the borrower is tricked into buying more house than they can afford.

Mortgage broker Nancy Bocian says she is a victim of fraud, to the tune of $400,000. She turned her life-savings over to Rebecca Solomon back in August, with six or seven other investors. At that time each was making small investments of between $30,000-$60,000, but Bocian invested much more. "I had no reason not to believe her, none." she said. "I had seen the house, I went to that party, I went out to dinners with them."

Bocian says that she knew things went wrong when their original agreement didn't work out on schedule, she was promised 10% interest per month and that the monies would be paid back in 60 days, avoiding the tax penalties on the IRA the money initially came out of. Not only did that not happen, but Nancy continued to attempt to contact Rebecca, who emailed more false promises in response. "It was not a good day for me because not only was I out that money, but the penalties amounted to $227,000 that I don't have." Nancy has since been in contact with the FBI, who raided the Tiburon, CA mansion just two weeks ago.

A Cincinnati, Ohio, mortgage broker pleaded guilty in U.S. District Court to bank fraud, conspiracy and income tax evasion charges in an ongoing federal probe of fraud in the buying and selling of low-priced homes in that town, the Cincinnati Enquirer reported Saturday.

Kelvin Mitchell, branch manager for Mortgages Unlimited, prepared loan applications that he knew were false because they overstated the borrowers' income and assets, federal investigators said, according to reports.

A San Jose woman was arrested Tuesday on charges she conspired to defraud mortgage lenders by falsifying borrowers' financial backgrounds. Melissa Renee Duran-Casaus, 32, also is charged with three counts of grand theft from some of the lenders for the amounts of the real estate loans that were paid out based on the false information she submitted to them.

According to court documents, she allegedly worked for a local insurance broker when she was asked by a real estate agent to handle employment verification inquiries from lenders in return for payment. Prosecutors say she falsely stated that the loan applicants had worked at the insurance brokerage for a number of years and were earning relatively high wages. If convicted of all the charges Duran-Casaus faces up to seven years and four months in prison.

A former loan officer, Jose Alfredo Ramirez, 28, was sentenced to four years' probation Tuesday for fraudulently obtaining home mortgage loans for people who lacked sufficient income or who were not U.S. citizens.

A condition or the probation includes 400 hours of community service work for Habitat for Humanity or another agency that assists people with affordable housing. The amount of restitution he must pay in the Jefferson County cases has not been determined.

Ramirez has also been sentenced to five months in prison in addition to five months in a halfway house on a similar set of charges filed by federal prosecutors. He also has been ordered to pay $140,000 in restitution in that case.