FRONT-PORCH SCAMS : Creative Con Artists Have Tricks That Can Cost You Your Home

By S. W. FARRELL

Feb. 7, 1993 12 AM PT

SPECIAL TO THE TIMES: Farrell is a Los Angeles free-lance writer.

You may think you could never be swindled by a scam artist. But don’t be too sure. It happened to these people and it could happen to you.

Carol, a secretary, and Michael, a teacher, bought their home 20 years ago in a suburban neighborhood where houses are now valued in the $250,000 to $400,000 range. Not long ago, as they were decorating for their 30th wedding anniversary party, they discovered a Notice of Trustee’s Sale on their front door. There must be some mistake, Michael said. They had always made their mortgage payments on time and they had about $175,000 equity in their home.

But it was no mistake. Their home was in the foreclosure process and some of their equity had been stolen from them through an increasingly common fraud pulled on homeowners. It took a lawyer, a lawsuit, thousands of dollars and several years to clear their home’s title.

The couple learned the hard way how the caper works:

A scam artist had searched them out through public records and learned that they had a large equity stake in the house. He typed up a blank grant deed form to make it appear that Carol and Michael had deeded the property to him. Working with a bogus notary, the con man had forged their names and recorded the deed at the county recorder’s office. Then he went to a private lender and using the grant deed as proof of ownership, borrowed $75,000, gave a phony address and disappeared.

When no mortgage payments were made, the lender sent notices of default to the bogus address, a vacant house. Finally came the Notice of Trustee’s Sale, stating the house would be sold in 20 days to pay the note.

The couple hired a lawyer to get an injunction to stop the sale and secure the roof over their heads. They finally recovered their title to the property, but only after spending thousands of dollars in attorney’s fees and waiting several years. In the interim they were not able to sell or mortgage their property until the title was cleared.

Harold, a physician, was one of those people who thought he could never be conned. Then one day a uniformed delivery man asked him to pay $25 in COD charges for his neighbor, who was not at home. The neighbor needed the package immediately, the man said, and had asked the company to promise delivery on that day. Harold was happy to help. When the neighbor returned home he told Harold he had never ordered anything.

Maria came from a country where the water supply was not always pure. So when she found an empty vial at her doorstep with an official-looking brochure stating she could have her water analyzed for dangerous pollutants without charge, she accepted the offer. Following the instructions, she filled out the attached card and left it with a water sample outside her front door.

A few days later a man from a water softener company arrived at Maria’s door. The water from her home was unhealthy, he told her, displaying the results of a precipitation test. He asked Maria if she allowed her children to drink the water and when she answered yes, he told her several horror stories about polluted water around the country. He showed her newspaper clippings to illustrate that the problem was widespread.

The salesman didn’t tell her that the test showed only the hardness of water and had nothing to do with contaminants.

Maria signed a contract for a $5,000 water softener after the salesman convinced her she would not only be protecting her family’s health, but the saving in soap, because of the soft water, would almost make up the monthly payment.

Because Spanish was Maria’s primary language and the contract was in English, she relied on the salesman’s word when he told her where to sign.

Language problems aside, she couldn’t have seen the clause of the contract that placed a lien on her home because it was folded under the salesman’s clipboard.

When Maria lost her job and defaulted on the payments, she was in danger of losing her home until an attorney came to her aid. A lien could not be placed on her home, the lawyer told her, for purchase of an item that was not attached to the property.

These scams are among the most common of many fraud schemes perpetrated on homeowners and renters every day in the Southland, attorneys and law enforcement authorities say.

The Legal Aid Foundation of Los Angeles receives about 5,000 complaints a year, or almost 20 every working day, related to home equity, repair or other real estate scams, said attorney Patricia Goldsmith. Many are from people who are about to lose or have lost their homes because of scams.

“In terms of white-collar crime, the current largest losses to individual victims are in real estate scams,” said Robert Youngdahl, the recently retired Los Angeles deputy district attorney who prosecuted these cases.

Con artists know that the real estate boom of the late 1980s created many more potential victims, Youngdahl said, as even modest homes bought years ago can now be worth hundreds of thousands of dollars.

“You must be smarter to prevent becoming a victim,” Youngdahl advised. “If you want to protect yourself, don’t believe oral deals. Everything in a written contract must be filled out and reread before you sign.”

Added Goldsmith: “Always say you want a copy of the paperwork to take home to show others. If they won’t let you take it, get up and walk out.”

Here is a brief rundown of some of the more common frauds in the Southland, and how you can guard against them:

Forged Deeds

Scam artists will check public records to find homes that have a good deal of equity and then forge quit-claim deeds from the owners to themselves. They then take the forged deed to a private “hard money” lender and borrow against the property. Once they get the money they disappear.

When the owners, as in the case of Carol and Michael, above, discover their home is about to be sold in foreclosure, they must hire an attorney to save the home. If the attorney is successful, the title company usually pays off, but only after much heartache.

A new law authored by Sen. Diane Watson (D-Los Angeles), will go into effect this year and will offer some measure of protection, but only in Los Angeles County. The law requires notaries to take a thumb print from anyone having a deed notarized. In addition, the recorder’s office must send a notice of transfer to the prior deed holder.

You can protect yourself, experts say, by being alert for the arrival in the mail of your annual property tax bill. If it fails to arrive, it might be going somewhere else. Check county property records to be sure that title to the property has not been transferred to someone else without your knowledge.

You can also ask a title company or your real estate agent to run a title search or property profile every few years to be sure there are no encumbrances on your home.

Hershel Elkins, head of the Consumer Law Section of the Attorney General’s Office, said that this scam is one of the hardest to guard against and is more common than you would think. When a deed forgery is discovered, Elkins advised these steps: contact the lender immediately, get an attorney and notify the title insurance company.

Advance Fee Schemes

Newspaper classified ads and word of mouth draw people who need loans to a con artist who claims to have foreign investors ready to lend money. If he or she asks for an advance fee to cover the expense of making the arrangements, the prospective borrower should see this as a red flag. The advance fee will be lost and the victim will never see the loan.

Unscrupulous Loan Brokers

When shopping for a mortgage, make sure you deal only with a licensed mortgage broker. Compare loans, interest rates, points and fees carefully. Licensed brokers are not subject to usury laws and where an institutional lender usually charges from zero to three points for a loan, private hard-money lenders can charge as much as 20 points. (A point is 1% of the loan; if your loan is $100,000, one point is $1,000.)

Be aware that there is no specific license for a person acting as a mortgage loan broker. Anyone who has a valid real estate broker’s license may also act as a mortgage broker and put borrowers and lenders together and take a commission for doing so. A real estate broker can also lend his own money if he wishes to do so.

You can check with the Department of Real Estate to find out if a mortgage broker has a valid license and also to learn if the person has been the subject of any disciplinary proceedings.

Whenever anyone solicits you, it’s imperative that you ask to see the license, get the number of it and ask the person which department issued the license. You should also ask to see their driver’s license to see if it matches the name on the broker’s license.

Beware of anyone who says he or she works under another person’s license, which is not legal. Law enforcement experts say this should be a red flag that the deal will most likely be fraudulent.

Homeowners who borrow against their property should make sure the trust deed is properly recorded and buy title insurance.

Foreclosure Sharks

When a homeowner is in foreclosure, the notice of default is often published in small, local newspapers as well as in foreclosure publications sold at newsstands. The foreclosure sharks who scan these notices know people in this situation are embarrassed and desperate and make easy marks when not informed. They will besiege you with offers to save your home, clear your credit and arrange refinancing.

Deputy City Atty. Ellen Pais, in the consumer protection section, who files these cases, said this is a very common scam, and unaware homeowners often transfer title to these sharks because they do not read the contracts and sign before all the blank spaces have been filled in. Or they do not understand what they’ve read and sign anyway, she said.

Pais added that there is a statute that prohibits anyone who claims to be a so-called “mortgage foreclosure consultant” from taking money up front. It also requires them to provide a contract.

Legal Aid’s Goldsmith added that homeowners should beware of solicitors who promise that they will consolidate your payments. There is usually a hidden balloon payment at the end, she warned. “You must get in writing that there will be no balloon payment,” Goldstein said, “and you tell the person you want to look at the Regulation Z form, which will mention the balloon payment, if there is one, in the line under the four boxes near the top of the 8 1/2 by 14 inch page.”

Phony Mortgage Bills

If you receive a notice stating that a new company has purchased your mortgage or taken over the loan servicing, always check the company you were doing business with to be certain this is true before you send a payment. This could be a scam.

Con artists sometimes pay a disgruntled employee of a mortgage lender or use computer hackers to get lists of borrowers. Then they send a letter stating that the payments now should be sent to a new company and usually give a post office box.

When a lender assumes your mortgage servicing, federal law requires that you be sent a “goodby” letter from the previous company and a welcoming letter from the new servicer.

Home Improvement Financing

Victims are often conned into purchasing home improvements secured by a mortgage on the home.

“Anytime you are getting involved in a real estate transaction to refinance your home or have work done, get a lawyer. If you don’t understand, get a translator,” Pais advised.

Senior citizens, especially widows with equity in their homes, should not use the home as collateral for repairs or for helping someone in the family, she said.

You can contact the Lawyers Referral Service and be referred to a lawyer who will give you a half-hour consultation for a nominal fee. If your questions cannot be answered in that time, you will be given an estimate of what it will cost to take care of your matter.

“Most contracts create a lien on the property and you can lose your home,” warned Tim Bissell, chief investigator of the Los Angeles County Department of Consumer Affairs.

“It’s important to remember that people can only take a lien on things that are affixed to the premises. According to the Business and Professions Code, no lien can be taken on things that can be picked up, such as carpeting, drapes, water filters, satellite dishes.”

When someone tries to sell you something in your home costing $25 or more, you have three days to change your mind after you sign. However, Legal Aid’s Goldsmith cautioned, “If you go to the person’s place of business, there is no three-day clause. If you want to get out of the deal before the three days are up, go to their place and take a witness with you. A clergyman or lawyer would be best. Remember that Saturday and Sunday count.”

If you are solicited by someone claiming to be a contractor who shows you a card with a license number on it, the experts advised that you should ask to see the person’s driver’s license to see if the names are the same. And always call the State Contractor’s Licensing Board to ask if there are any complaints against the contractor you plan to use.

“Get three estimates when you want work done and never give more than 25% up front,” Goldsmith said. “Have everything detailed on paper and never sign a certificate of completion if the work is not complete.”

Louis Bonsignore, director of public affairs for the state Department of Consumer Affairs, advised:

“Get references. It’s like getting a second opinion from a doctor. A good contractor keeps lists of references. Ask if you can drive by and see the work that was done. Do this for swimming pools as well.”

Added Goldsmith: “Sometimes a contractor will ask you to sign an estimate and it turns out to be a deed of trust. Most important to remember, don’t sign while (the contractor) is there.”

Selling Property Without a Broker

If you decide to sell your home yourself, you could be approached by a prospective buyer who will offer to pay your full asking price, with 1% to 5% down and the remainder in a few months. People fall for this scam because they are happy to receive their asking price and often need to leave the area quickly. The fraudulent buyer rents the property and the seller never sees the money.

Los Angeles police detective Richard Levos, of the Bunco-Forgery Division, said he gets many of these cases from home sellers who did not use escrow companies or buy title insurance.

Rent Skimming

Con artists look for empty, well-kept houses whose owners live out of town. They put up “For Rent” signs, collect as many deposits as they can from eager renters, pull up the signs and disappear. Soon all the “tenants” try to move in. Levos says this scam is very common and is difficult to prosecute because the victims have difficulty identifying the person to whom they gave the deposit.

Fake Delivery Scheme

As in the anecdote above involving Harold, the physician, an authentic looking, perhaps uniformed, delivery person will come to your door saying he or she has a COD package for a neighbor who is not at home and asks you to pay the charge. The best advice is to refuse, unless you were asked to receive the package.

Home Burglaries

A thief, or thieves, gaining entrance to your home by various ploys, such as asking for a glass of water or to use the bathroom, will grab jewelry or other valuables when your guard is down or your attention diverted.

One scheme has people coming to your door saying their car has broken down and they need to call a cab. Sometimes the person will say a child has been injured or is ill and he must call a cab.

In another con, two elderly people will say they used to live in the neighborhood and were just passing by and could they come in for a glass of water. Most people are embarrassed that they don’t remember the alleged former neighbors so they let them in.

In a variation on this theme, a person will purport to be from a utility company (e.g., the “gas man” checking for leaks), to enter your home. If anyone comes to your door that you have not called, make the person wait outside while you call the utility or the police to see if that person has been sent.

It’s not enough, the experts say, to call a number the person gives you; anyone can answer the phone as the gas company. You must call the main number of the utility yourself.

Never open your door to a stranger, especially when you are alone, experts advise. If someone has a real emergency, you could always make the call for them without opening your door.

Home Repair Scams

These rip-offs are usually pulled by con artists who are part of a group several hundred strong. They will come into an area and offer to oil a shingled roof or repair a driveway for a low fee if they can do the work immediately. When the victim agrees, he or she discovers the fee is much higher after the work is done. Older people usually cannot go up on the roof to check, so they are especially vulnerable to this scheme. The con men will often do work at a low fee for one resident to create a referral in the neighborhood to draw in victims.

Many of these people will do more than overcharge for shoddy work. While one is using the cement mixer, another will go into the house for hot water, then steal valuables. Often the victim doesn’t know anything is missing until the criminals are gone.

The largest of these groups, whose members are related, is called “The Travelers” by law enforcement officers because they work the entire United States. They are found in Southern California from November through February because they can’t pull their scams during harsh winters in the East and Midwest.

Water-Filter Scam

Bissell, of the County Department of Consumer Affairs, said this scheme often targets foreign-born residents because many of them have lived in countries where impure water is a major health problem.

As in the anecdote above involving Maria, someone will leave an empty vial at the doorstep with an official-looking brochure stating they will analyze the water to see if it is dangerous. What they perform is a precipitation test for hard water as a ruse to sell a water softener, and in arranging the terms of payment, the con man will often trick the victim into signing a contract that will put a lien on the property.

Such a lien is a violation of the Business and Professions Code because water filtering systems are not permanently affixed to the home.

False Charitable Solicitation

Beware of calls or visits from solicitors representing a charity you haven’t heard of but which sounds like one that is well known, the LAPD’s Levos warned. The word United is popular with con men, he said, because it can be confused with the United Way.

“If somebody says they are sending a courier to pick up your donation this is a red flag to show it’s probably a scam,” Levos said. “Also, if people want you to use Federal Express or some other immediate delivery service, remember, the theft of your money, which is a felony, can’t be prosecuted as mail fraud.”

Whenever a solicitor comes to your door for a charity and you feel you might want to donate, ask the person to wait outside and call the Department of Social Services to find out if there is a permit to solicit on file. You can also ask the person to leave the information at your door and you can act on it later.

Because it is difficult to recover what you have lost to scam artists and con men, the experts warn, it’s important to prevent the frauds before they occur, even if you have to abandon, for a short time, your trust in humanity.

The home you save may be your own.

Numbers to Call to Report Scams

Los Angeles Police Department, Bunco-Forgery Division:

(213) 485-4131 concerning forgery: (213) 485-3795 for a bunco scheme or con game

City Attorney’s Office, Consumer Protection Section:

(213) 485-4515

Los Angeles County Sheriff’s Department, Forgery and Fraud Detail: (310) 946-7212.

Los Angeles County Department of Consumer Affairs:

(213) 974-1452.

Legal Aid Foundation (city of L.A. only): (213) 732-0153.

Bet Tzedek (county of L.A.): (213) 939-0506.

U.S. Postal Inspector’s Office: (818) 405-1200. (To report mail fraud.)