Expert Calls Regulation Key to Combating Mortgage Fraud.(Managing REO)(Conference notes)

Byline: Brad Finkelstein

LAS VEGAS-The key to combating mortgage fraud is "regulation, regulation, regulation," the director of research and policy for the Community Law Center told attendees at SourceMedia's Mortgage Fraud Conference in Las Vegas. Robert J. Strupp continued that the problem is people choose not to enforce the existing laws or modify them to meet the current conditions.

Among the issues he addressed in his presentation are "self-proclaimed" loss mitigation specialists and "certified" foreclosure consultants. No state certifies foreclosure consultants, Mr. Strupp declared, adding, "In my opinion, this whole industry needs to be regulated and it is not."

Among the red flags servicers should look for regarding possible foreclosure relief scams are these consultants telling the borrower not to contact the servicer, he said. Another sign is the borrower is paying a third party to negotiate for them. He also said to watch out for cash being disbursed at the closing that has not been approved by the servicer. Also be aware of a sudden default by the borrower, and then receiving a short-sale offer without having any workout discussions.

Rodney Nelsestuen, research director for TowerGroup, takes an opposite position from Mr. Strupp towards increased and detailed regulation.

At first, he said, it can be prescriptive in dealing with the problem, but in the end it will fail because the prescription will provide fraudsters with a road map to get around the problem.

Any solution to fraud needs to be principal-based, Mr. Nelsestuen said. People need to be called to a higher sense of accountability.