Beware Fraudulent Liens on Foreclosed Properties!

As you probably know, an empty home can be a target for all sorts of crime.  Every once in a while you might read a news story about an empty home that was broken into, damaged, or used by a gang for criminal activity.  However, empty homes are targets for less violent forms of crime also.  Specifically, it is easy to commit fraud when no one is checking up.

Foreclosed homes, in particular, are a target.  No one is looking out for them.  The banks are too far away and much too busy to know what is going on with each of their properties.  As a result, some individuals and/or companies have developed a new scam — they will claim that they have completed repairs on a property and file a mechanic’s lien, even if they have not actually done any work at all.  When the property is ready to close, the bank will be forced to pay the lien if they do not want to delay the closing or risk losing the buyer.

Recently, after allowing a transaction to close when a lien popped up at the last minute, the Federal National Mortgage Association (FNMA) found such a scam.  Upon investigation, it was determined that the lien was fraudulent; moreover, the same person had filed a similar lien on a number of other FNMA properties. 

Moral of the story — If a mechanic’s lien appears on the title report of a foreclosed property, make sure you investigate to see if the work was actually performed before paying it!