Victims have been cheated out of hundreds of thousands of dollars overnight, with imposters also gaining access to borrowers’ sensitive personal information.
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Real estate and mortgage brokers who are offered a warehouse line of credit are advised to be on the lookout for imposters who have scammed victims out of hundreds of thousands of dollars overnight and gained access to borrowers’ sensitive personal information.
Some victims are unwittingly lured into the scheme with promises of hefty commissions if they become “account executives” for the sham lender and help sign up mortgage brokers for fake lines of credit, the California Department of Real Estate warns.
“The account executives then proceed to solicit mortgage brokers to begin using the scammer as their primary funding source by offering the mortgage broker a warehouse line of credit” — typically $1 million to $5 million — regulators said.
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The mortgage brokers who are recruited by the account executives are required to pledge 1 percent of the line of credit, leading them to wire amounts ranging from $10,000 to $50,000 to the scammers.
After completing a fake virtual training session, the mortgage brokers are invited to submit loan packages to the scammer which include borrowers’ addresses, dates of birth, social security numbers, bank account information and other sensitive information.
But the loans never fund, and there is “no communication from the scammer, email addresses are disabled, phone numbers are disconnected, websites are taken down, mortgage broker training and submission portals are closed, and the scammer absconds with the mortgage broker’s pledge money,” regulators said.
“This fraudulent scheme is not just financially disastrous to legitimate licensees, it damages their livelihood and their reputation,” the California Department of Real Estate warned. “Additionally, it is hugely distressful to consumers who anticipate closing their mortgage loan after a long process and who have their [personal information] at risk and who had entrusted their transaction to their mortgage broker.”
Warehouse lines of credit can be a vital tool for mortgage brokers, allowing them to fund loans to homebuyers more quickly and have more control over the underwriting, funding, and closing process. Having a warehouse line of credit can also help brokers resell mortgages they originate at a profit.
Warehouse lenders are typically banks or other depository institutions that provide lines of credit to independent mortgage banks that don’t have any customer deposits to lend against.
Before working with a warehouse lender they’re not familiar with, mortgage brokers are advised to ask for licensing information, which should be thoroughly vetted by contacting the Department of Real Estate, the Department of Financial Protection and Innovation, the Consumer Financial Protection Bureau, U.S. Department of Housing and Urban Development (HUD), Veterans Affairs (VA), “or any other state regulator that may have jurisdiction over the licensing and activities of the lender.”
Brokers should request references from warehouse lenders, and contact mortgage and related trade organizations to gain their insight.
Mortgage brokers who fear they may have been a victim of such a scam are advised to contact their local, state, and federal law enforcement agencies. Brokers can also contact the California Department of Real Estate at 877-373-4542 or file a written complaint online at www.dre.ca.gov.
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