Beware: Pyramid scheme based on home mortgages

Before you go, we thought you'd like these...
Before you go close icon
More than 800 Pennsylvania homeowners have been hoodwinked into almost losing their homes. The homeowners refinanced their homes with Wesley A. Snyder, who has now pleaded guilty to federal mail fraud charges and faces up to 30 years in prison.

The homeowners took out mortgages on their homes, borrowing more money than they really needed to refinance or purchase the homes. The excess funds were given to Snyder, who promised to invest them. They gave him the money because he promised they'd get lower interest rates on their mortgages by doing so.

Snyder made off with more than $29 million from homeowners during his 19-year scheme.

Word to the wise: There is one universal principle that can help consumers sniff out scams like this. If it sounds too good to be true, it probably is. A hallmark of a pyramid scheme is offering something (like a better interest rate) that isn't available on the open market.

The first question consumers should ask themselves is how can the person promoting the scam offer this unusual perk? The answer is almost always that they can't. If Snyder's method for lowering interest rates was legitimate, wouldn't other brokers be offering similar products?

If it sounds too good to be true, run (not walk) the other way. Homeowners have been told they shouldn't expect much in the way of restitution. Snyder has filed for bankruptcy.

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
Read Full Story
Credit Card Compare

Credit Card Compare

Whether you're looking for great travel rewards or low annual fees, find the card that's right for you.

Compare Now

From Our Partners