Austin American-Statesman - - MONEY & MARKETS - Con­tact Bob Sech­ler at 512445-3645.

Mean­while, the orig­i­nal seller can have his or her credit ru­ined for the same rea­sons.

“These are al­most al­ways un­so­phis­ti­cated, first-time home buy­ers,” said Veron­ica Car­ba­jal, an at­tor­ney with Texas Rio-Grande Le­gal Aid in El Paso. “We would ar­gue that the only thing they have done wrong is trust some­one and open the door to fraud.”

In El Paso, the Texas De­part­ment of Sav­ings and Mort­gage Lend­ing is­sued a cease-and-de­sist or­der last year af­ter a wrap scam­mer made off with nearly $2 mil­lion from 200 fam­i­lies, of­fi­cials said.

In Austin, the agency is in­ves­ti­gat­ing po­ten­tial wrap scams in­volv­ing about 40 homes in the Dove Springs area, and it also is­sued a cease-and-de­sist or­der in the case. The Austin Amer­i­can-States­man wrote about the sit­u­a­tion in Dove Springs in 2016 and 2015.

“It is a pretty egre­gious set of cir­cum­stances,” Wat­son said Monday. “These are preda­tory peo­ple tak­ing ad­van­tage of peo­ple who are just try­ing to buy a home.”

Wat­son’s bill, SB 1995, would in­crease wrap loan dis­clo­sure re­quire­ments, add some en­force­ment pro­vi­sions and also man­date that the dis­clo­sure be pro­vided in a lan­guage other than English if the loan was pri­mar­ily ne­go­ti­ated in an­other lan­guage.

The bill filed by Ro­dríguez, SB 1993, elim­i­nates a loop­hole that cur­rently al­lows wrap lenders and ser­vicers to avoid li­cens­ing re­quire­ments from the Texas De­part­ment of Sav­ings and Mort­gage Lend­ing.

Zaf­firini’s bill, SB 1994, would ren­der a wrap loan void un­less it is made with the prior, writ­ten con­sent of all ex­ist­ing lien­hold­ers and is closed at a ti­tle com­pany of­fice. It also cre­ates a fidu­ciary obli­ga­tion and con­struc­tive trust for all pay­ments a new owner makes to a wrap lender, en­sur­ing the pay­ments are used for their in­tended pur­pose.

Wat­son said he’s op­ti­mistic the bills will be ap­proved, say­ing rep­re­sen­ta­tives of the bank­ing and mort­gage sec­tors he has spo­ken with have been sup­port­ive of them.

“It pro­tects them in the long run,” he said. “They don’t want to have to fore­close on a house be­cause some­one didn’t know there was a lien on it.”

Susie Stringer, pres­i­dent of the Cen­tral Texas As­so­ci­a­tion of Mort­gage Pro­fes­sion­als, said she hadn’t heard about the pro­posed leg­is­la­tion, but she also de­scribed preda­tory wrap­around mort­gages as “scams.”

“I would ad­vise peo­ple to go through stan­dard chan­nels (when they buy a home) — a ti­tle com­pany, an at­tor­ney,” Stringer said. “Have all the pa­per­work prop­erly ex­e­cuted. There is no need to go through a mid­dle­man who has only his own in­ter­est at heart.”

In El Paso, Car­ba­jal said, mil­i­tary fam­i­lies have been typ­i­cal vic­tims of the scams. They re­ceive or­ders to ship out to a new base and opt to try to sell their homes quickly.

Sim­i­larly to un­so­phis­ti­cated buy­ers, she said, such sell­ers often come in con­tact with wrap scam­mers by re­spond­ing to cor­ner street signs. While all such signs might not be scams, she urged peo­ple to fully vet any­one with whom they’re con­sid­er­ing en­ter­ing into a real es­tate trans­ac­tion.

“They see a sign on the street that says, ‘We Buy Houses,’ or ‘Fast Cash For Your House,’ and it seems very easy to sell their home,” Car­ba­jal said.

“Our clients are work­ing-class Tex­ans,” she said. “It is a shame that peo­ple have taken ad­van­tage of their trust to rob them of tens of thou­sands of dol­lars.”

Mil­i­tary fam­i­lies have been typ­i­cal vic­tims of the scams. They re­ceive or­ders to ship out to a new base and opt to try to sell their homes quickly.


State Sen. Kirk Wat­son, D-Austin, talks to Sen. Kelly Han­cock, R-North Rich­land Hills, on the Se­nate floor last month. Wat­son and two other Demo­cratic sen­a­tors have filed leg­is­la­tion seek­ing to rein in providers of “wrap­around mort­gages.” The state is in­ves­ti­gat­ing nu­mer­ous cases of wrap scams.

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