Mortgage holders warned of scam

December 22, 1990|By American Banker

NEW YORK -- Reacting to reports of mortgage-billing scams, Citicorp Mortgage Inc., the nation's largest servicer of home loans, has issued a blunt warning to its 700,000 borrowers.

In a notice accompanying current monthly statements, the Citicorp unit urges homeowners to "please disregard any communications you may receive from other companies requesting that you mail your mortgage payment to them."

Press reports across the country have called attention to schemes in which homeowners get bogus letters saying the rights to service their loans have been sold to another company. The borrowers are told to start sending their monthly payments to the supposed buyer, which steals the money.

A Citicorp Mortgage spokeswoman said none of the company's own borrowers has fallen prey to a servicing-transfer scam. Rather, she said, the notice was sent "in response to a problem that's been occurring generally in the industry."

Such scams have risen alongside the growth of the secondary market for servicing rights.

In the past few years, more and more lenders have begun selling at least some of their servicing rights to bolster profits. Citicorp, however, rarely sells its rights, the company's notice said.

When servicing rights are to be sold, industry standards call for both sellers and buyers of servicing rights to notify borrowers. Recently enacted legislation provides further safeguards. Nonetheless, scam artists evidently have seen an opportunity.

In August, for example, an estimated 100 homeowners in Chesterfield County, Va., received notices to start sending their payments to a William E. Scott and Co. at an address in Jacksonville, N.C. About a dozen of the homeowners apparently followed the instructions, even though the company was fictitious, according to Detective June Gelling of the Jacksonville police, who are still investigating the case.

"People don't check things," she said. "They just went ahead and sent in their money without asking any questions."

L Law enforcement authorities managed to intercept the checks.

Detective Gelling said the authorities were tipped off when a woman who works at the bank that services her loan got one of the bogus letters. The woman swiftly reported the letter to a bank officer.

Sovran Mortgage Corp., based in Richmond, Va., found that two of its 175,000 customers had received the bogus notices in August, said Donald Atkins, a first vice president at the company.

Thomas Ducey, director of loan servicing for the Federal National Mortgage Association, said servicing-transfer scams have become more common in the past three or four years. But he said the agency had not heard of a notable increase during the past few months or the past year.

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