Freddie Mac warns of bogus landlords renting out foreclosed homes

WASHINGTON — No one wants to take the blame for the housing bust in this political season, but scammers and rip-off artists in the hundreds are working overtime to siphon dollars out of the wreckage of the crash and its still-vulnerable victims.

You’ve probably heard about the loan-modification predators who promise financially ailing homeowners that they’ll prevent or forestall foreclosures —but are really after thousands of dollars in fees, for which they do nothing.

Now the second-largest source of mortgage money in the country — Freddie Mac — is warning about a troubling wave of post-crash fraud: scammers who illegally rent out foreclosed and for-sale homes to unsuspecting consumers. The bogus landlords don’t own the properties — Freddie does — and they have no right to offer them to anyone. But they use Craigslist and other websites to advertise them to prospective tenants.


Typically the rents are tantalizing — say $1,200 a month for a three-bedroom home in a neighborhood where similar houses command double that — and the terms are straightforward: Pay us a security deposit and one or two months’ rent upfront — always in cash or money order — and we give you the keys, no questions asked. The fraud promoters sometimes change the locks on the front door, remove the lockbox installed by the real estate agent marketing the house for Freddie Mac and tell prospects: Oh, and don’t worry about that real estate sign in the front yard offering the house for sale. We tried to sell the house but it didn’t work out, so now we’re renting it.

According to real estate brokers working with Freddie, this type of scam can bilk unwary rental home shoppers — some of whom have lost their own homes to foreclosure or short sales — out of hundreds or thousands of dollars. Robert O’Hara, a foreclosure specialist with Re / Max Synergy in suburban Chicago, said one victim told him that she lost a total of $10,000 in upfront fees and rental payments to a fraudulent landlord before she was forced to leave the property.

“This is happening all over the place, in every price range,” O’Hara said. “They take the victim’s money and disappear.”

Sometimes the tenants don’t even get the keys; they fill out a fake lease application, disclose sensitive personal information such as their Social Security number and financial data, send the money and never hear a thing again.

Other times they move in and are later discovered by property managers or the real estate agent who listed the house for sale. If they refuse to move out, they’re evicted, although in some areas of the country, this can take a long time.

Foreclosure rental scams are becoming a significant problem, said Robert Hagberg, Freddie Mac’s associate director of fraud investigations, in part because of the sheer number of foreclosed properties on the market for sale. Freddie Mac had more than 53,000 houses — spread from California to the East Coast — listed for sale, under contract or being readied for sale as of June 30. Hagberg estimated that there have been dozens of houses recently affected by foreclosure rental scams. During the last few months alone, he added, there have been more frauds of this type than were reported in all of 2011.

Another reason foreclosure scams are becoming more commonplace: In the backwash of the worst economic downturn since the 1930s, rental markets are unusually competitive in many cities. People who would have purchased or owned homes before are now shopping for deals on rental houses and condos. When they check out what appears to be a legitimate listing online — with photos and detailed property descriptions, plus a bargain rent — they bite.

For consumers shopping for rental homes and condos who want to avoid getting ripped off, here’s what Freddie Mac recommends:

• Check to make sure the property is not already listed for sale. Google the house address and drive by to see if there are for-sale signs posted. You can also check Freddie Mac’s foreclosure listings at

• If you discover that the “rental” is already listed for sale, notify the listing agent immediately.

• Under no circumstances should you submit an online lease application, including personal credit data, until you have verified that the house is a bona-fide rental. Otherwise, you risk losing not only upfront deposits and rent payments to swindlers but also your financial identity.

Distributed by Washington Post Writers Group.