Why Have Foreclosure Prevention Scam Artists Been Able to Convince Many Home Owners That They Would Save their Homes
The foreclosure prevention scam described in the recent decision of the United States Court of Appeal for the Third Circuit, United States v. Poulson, 2017 U.S. App. LEXIS 17781, is a tale too often told, and yet another proof of the fact that if it sounds too good to be true it probably isn’t. Paulson who was president of the South Jersey Real Estate Investors Association, persuaded homeowners that they could avoid foreclosure by selling their homes to him, falsely promising that he would pay their mortgages in return for the sales. When viewed objectively, it seems patently obvious that the promises made by Paulson were untrue. Why then have so many foreclosure scam artists like Paulson been so successful in persuading those they victimized?
The Great Majority of Homeowners Victimized by Foreclosure Scams Are Reasonable and Sensible People Whose Fear Made Them Vulnerable to Magical Thinking
Homeowners who have consulted us after being victimized by foreclosure scam artists have generally not been unreasonable people addicted to wacky ideas. To the contrary, the great majority have been entirely reasonable and sensible in their personal affairs. But, for a variety of reasons such as unemployment and illness, they have now lost control of their affairs and fear the loss of their homes which are the anchors of their lives. What they now seek is an answer, a cure, a magical solution – the stuff that fairy tales and the pitches of scam artists are made of. For so long as there are events whose consequence people cannot control and which control people’s lives, there will be purveyors of magical cures.
“According to theories of anxiety relief and control, people turn to magical beliefs when there exists a sense of uncertainty and potential danger and few logical or scientific responses to such danger. Magic is used to restore a sense of control over circumstance. In support of this theory, research indicates that superstitious behavior is invoked more often in high stress situations, especially by people with a greater desire for control.” Wikipedia Magical Thinking/citations omitted.
Greed Motivated Investors Who Were Promised Astronomical Interest Rates on Loans Secured by Non – Existent Properties
As further proof of the fact that if it sounds too good to be true it probably isn’t, Paulson used the greed of investors to defraud them. They were promised sky high interest rates on loans secured by the properties signed over to him by homeowners. . This part of his operation was basically a Ponzi scheme. He paid interest on the older loans by to persuading new investors to make loans supposedly secured by the same properties as the older loans. Like all Ponzi schemes, Paulson’s scheme worked as long as the amount of the new loans exceeded the ‘interest’ being paid by him on old loans.