Victims of real estate fraud usually have few financial resources left to avoid foreclosure while they fight lengthy court battles to void the fraudulent deals. But under a pilot loan program recently passed by the City Council, Los Angeles residents would retain their homes and ultimately be able to refinance them.
The revolving fund will provide eligible low-income homeowners with loans averaging $5,000 at 3% to 4% interest. The goal is to enable homeowners victimized by con artists to catch up on their loan payments, relieve them from default and prevent foreclosure.
"We're hoping that this will prevent scammers from preying on people and making them sign up for loans with exorbitant rates that eventually take their homes away from them," said Troy Smith, directing attorney of the Greater Watts Justice Center. City officials estimate that three to five fraud victims per month would be eligible for the emergency loans.
The goal in many real estate scams is to get victims to sign deeds of trust using their property as collateral in case they default on loans. In home loan scams, fraudulent lenders sometimes steal the money from victims after convincing them that the money will be used for investments or debt consolidation.
Law enforcement officials and public-interest attorneys estimate that 60% of the victims of real estate fraud live in South-Central or East Los Angeles. Those neighborhoods are often targeted by con artists because of the dearth of lending institutions. With few alternatives, residents often turn to whomever will grant them loans and often fall victim to alleged loan brokers who charge exorbitant interest rates.
The estimated number of real estate fraud cases has grown from the hundreds to the thousands over the past dozen years, authorities said. Some victims who try and recover their losses in civil court are sometimes further indebted by attorneys' fees and court backlogs. Even if the court rules in favor of the plaintiff, finding the con artist to collect damages is an iffy proposition at best.
Representatives from the Legal Aid Foundation of Los Angeles, Greater Watts Justice Center and the Committee for Responsible Reinvestment drafted the city's recently enacted pilot proposal, which calls for creating a revolving loan fund that provides an emergency pool of money for needy residents.
The organizations have joined with the Los Angeles Department of Housing Preservation and Production and community banks--including Broadway Federal Savings Bank, Founders National Bank and Family Savings and Loan--to run the program.
Working through the Department of Housing Preservation and Production, the loan program would use federal funds to establish a $250,000 emergency loan pool. The loans will be doled out through one of the south Los Angeles-based banks.
Ron Kaye of the Legal Aid Foundation, officials from the Department of Housing Preservation and Production and the City Council Committee on Housing and Community Redevelopment will work out details of the program, which is expected to be running by Dec. 15.
Information: (213) 732-0153.