EL PASO, TEXAS Oct. 19, 2016 — During a Wednesday press conference at the office of Texas state Senator José Rodríguez, government agencies and advocacy groups announced the creation of a new financial crimes task force that will tackle “wraparound” home mortgage scams.
The national Better Business Bureau recently reported that marketplace scams affect one in four households in America each year at an estimated loss to victims of $50 billion. Such financial crime is the elephant in the room—a huge problem that goes largely unacknowledged. To address it, various agencies and organizations in El Paso have created the new task force.
One of its top priorities is the increasing use of “wraparound” real estate financing. When the tactic is employed illegally, a person is led to believe that he or she is buying a house with a clean title although the property is still encumbered by a mortgage in the previous owner’s name. That first loan does not get paid off when the new buyer purchases the home. Scam artists acting as middlemen collect large down payments and monthly payments. They frequently pocket the payments from new buyers instead of using them to pay on the first mortgage. When the house goes into foreclosure, the prior owner’s credit is destroyed. The wraparound buyer loses an average $30,000 and may be evicted without notice even if she or he has made all payments on time.
“El Paso is a target for wraparound scams for a number of reasons,” Rodríguez said. “We have a large pool of active duty military families who need to sell their homes quickly and cheaply. We also have a large number of first-time home buyers without the credit to obtain a traditional bank loan and no experience buying a house. Scam artists promise to take care of the mortgage and sell the house for the prior owners. Instead, they walk away with thousands of dollars by selling it again and letting the first mortgage fall into foreclosure. The state recently issued three cease and desist orders against three businesses for operating without a license because they were destroying home buyers’ lives in this way.”
The task force brings together various agencies and organizations, including Texas RioGrande Legal Aid, that will work collaboratively to identify scam artists, collect information about scams, and provide victims with an effective and comprehensive response. Another important task is educating the public.
“We will continue to sue these actors and file administrative complaints against them,” said K-Sue Park, an attorney with Texas RioGrande Legal Aid. “In addition to that, these actors should face criminal penalties, and we must all work on raising awareness of these scams so that fewer people will fall into this trap.”
BBB recently put up two billboards designed to educate home sellers and home buyers. In order to get the public’s attention, the billboards use the same language as the street signs used by the scam artists. “We got a call from someone asking us for advice on how to sell her home the same day the billboards went up,” said Yvette Ramirez of the BBB in El Paso.
Complaints from members of the public should be made to the following agencies: Texas RioGrande Legal Aid (915 585-5101), El Paso County Attorney’s Office (915 546-2050); Office of the District Attorney for El Paso (915 546-2059); Attorney General’s Office, Consumer Protection Division (915 834-5800); Texas Department of Savings and Mortgage Lending (1-877-276-5550); El Paso Police Department, White Collar Unit (915 212-4100); Fort Bliss: (915 569-8376); Better Business Bureau of El Paso (915 577-0191); Senator José Rodríguez’s Office (915 351-3500); Federal Bureau of Investigations (915 832-5000).