Report Looks At Scams By Those Who Claim To Rescue Homes From Foreclosures
Not every savior is a savior
Marking Fair Housing Month, the Lawyers’ Committee for Civil Rights Under Law has issued a comprehensive national report, “Foreclosure Rescue, Inc.”, which examines the foreclosure rescue fraud epidemic, scam trends and efforts to combat these fraudulent activities.
The Lawyers' Committee and its coalition partners in the Loan Modification Scam Prevention Network (LMSPN) have been tracking the foreclosure rescue fraud crisis since March 2010. As of early 2014, the national Loan Modification Scam Database, managed by the Lawyers’ Committee, has compiled over 40,000 complaints with total reported losses of over $90 million to homeowners.
“Homeowners facing difficult financial circumstances are desperate to find help to keep their homes are vulnerable to high-pressure sales pitches and false guarantees of success made by individuals and companies posing as loan modification specialists,” said Yolanda McGill, manager of the Loan Modification Scam Prevention Network for the Lawyers’ Committee. “African-American and Latino homeowners, already victimized by targeted predatory lending, have been victimized by scams at disproportionate rates compared to their percentage of the population. Senior homeowners also are victimized at high rates and their average loss is higher than other groups. The Lawyers’ Committee and our federal, state and community partners continue to fight back and put these scammers out of business, including through litigation.”
By the summer of 2009, the United States in the midst of its worst economic crisis since the Great Depression. Home foreclosures were in the millions with no end in sight, and equity lost by families with foreclosed properties was headed into the trillions of dollars. As foreclosures increased, a “second wave” of the foreclosure crisis emerged – fraudulent foreclosure and loan modification rescue schemes. Data collected in a 2013 U.S. Government Accountability Office (GAO) audit indicate that complaints concerning such schemes rose from about 9,000 in 2009 to more than 18,000 each year in 2010, 2011 and 2012. This report provides an overview of the LMSPN, a coalition created in 2009 by the Lawyers’ Committee, in conjunction with Fannie Mae, Freddie Mac, NeighborWorks America and the Homeownership Preservation Foundation (HPF) to fight these pernicious practices.
As discussed in the report, scam artists making these pitches typically extract large upfront cash payments from homeowners, and then do little or no work to obtain a loan modification. While waiting for the promised relief, homeowners not only lose the money they paid to the scam operation, but they often fall deeper into default and lose valuable time that could have been spent negotiating directly with their mortgage servicer or going to a free U.S. Department of Housing and Urban Development (HUD) approved housing counseling agency with true expertise in assisting homeowners in trying to save their homes.
Scammers commonly gain access to bank accounts and social security numbers, and tell homeowners to stop paying their mortgage – decimating their credit, and sometimes leading to foreclosure and homelessness.
“While foreclosure rescue fraud comes in various forms, it all boils down to the same result – the widespread pickpocketing of homeowners throughout the United States, when they can least afford it,” said Michael Tanglis, analyst with the Lawyers’ Committee’s Fair Housing and Community Development Project.
Information in the report include:
Ø The average loss per homeowner is $3,248.
Ø Overall, homeowners nationwide reported an out of state scam 64 percent of the time.
Ø When homeowner race is taken into account, Hispanic or Latino homeowners buck the national trend—alleging an in state scam operation a stunning 69 percent of the time. This percentage is particularly high when compared to Black or African American and White homeowners.
Ø Hispanic/Latino homeowners account for 20 percent of all complaints in the Database, but they account for 34 percent of the complaints that mention radio or television.
Ø While White homeowners account for 47 percent of the complaints in the Database, they account for 78 percent of the homeowners nationwide. Hispanic/Latino homeowners account for 8 percent of homeowners nationwide, but account for 20 percent of all the complaints in the Database, while African-Americans account for 8 percent of homeowners nationwide and 24 percent of the complaints in the Database.
Ø From July 2012 through December 2013, the majority of complaints received in the Database each month have alleged attorney involvement (59 percent in 2013 alone).
Ø From 2009 to 2012, pro bono partner law firms donated legal work to this effort valued at over $12 million ($12,423,847).
The Lawyers’ Committee released two companion reports this month focusing on the domino effect of foreclosure rescue fraud and the targeting of homeowners with limited English proficiency and will soon release one detailing attorney involvement in scams.
Anyone who has fallen prey to these unscrupulous scammers is encouraged to file a complaint online here or by calling 888-995-HOPE to file a complaint and find safe, reliable and free help.