Gov. Agencies Crack Down on Foreclosure Rescue Scams

The U.S. Department of the Treasury, the U.S. Department of Justice, the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the Attorney General of Illinois announced the launch of a new initiative on Monday aimed at foreclosure rescue scams and loan modification fraud.
In a press briefing and conference call with the media, government officials had harsh words for those companies they say are preying on vulnerable homeowners, wielding such derogations as “unscrupulous,” “cheating,” and “lying” to describe supposed mortgage modification and foreclosure relief companies out to make a quick buck with their deceptive schemes.
According to Treasury Secretary Timothy Geithner, these marauders “callously rob Americans of their savings and potentially their homes,” and with the announcement of the government's nation-wide homeowner assistance plan, Geithner says they have begun intensifying their tactics.
The multi-agency anti-fraud initiative intends to align responses from federal law enforcement, state investigators and prosecutors, civil enforcement authorities, and the private sector to protect homeowners seeking assistance under the administration’s Making Home Affordable program from criminals and their predatory plots.
Geithner announced two specific actions as part of the crack down on fraud. First, he said, Treasury’s Financial Crimes Enforcement Network, known as FinCEN, is issuing an advisory to help financial institutions spot and report questionable loan modification schemes. The advisory provides “red flags” for financial institutions that may indicate a loan modification or foreclosure rescue scam.
Second, Geithner said, is the launch of a targeted effort - to be coordinated by FinCEN - to deter fraudulent activity and combat fraudulent loan modification schemes. FinCEN, working with partners from the law enforcement and regulatory communities, will utilize information provided by the financial industry, along with other information supplied by participating agencies, to identify possible loan modification fraud suspects for civil and criminal investigations. FinCEN will also help law enforcement agencies streamline and coordinate their efforts so that the resources of multiple investigative and prosecutorial agencies are efficiently utilized and remain focused.
Geithner said, “What today’s announcement means for American homeowners is this: We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar. And we will increase our knowledge of how these companies operate, enhancing our efforts to identify and prosecute every individual involved in a mortgage rescue scam.”
Geithner said he was “especially pleased” that Illinois Attorney General Lisa Madigan had joined the inter-agency team for the announcement, demonstrating the federal-state partnership to target mortgage loan modification and foreclosure relief scams.
Madigan has fought hard against such schemes targeted at distressed homeowners and has prosecuted 24 different companies for foreclosure relief fraud in her state. According to Madigan, so-called foreclosure rescues and mortgage consultants who demand money before rendering services are “almost always a scam.” Madigan warned that up-front fees, which are strictly illegal in many states, should serve as an immediate warning of a probable scam.
Often these suspect organizations bear official-sounding names that give the impression they are associated with new federal mortgage programs or government-related organizations. At the press briefing announcement on Monday, FTC Chairman Jon Leibowitz specifically called out Northridge, California-based Federal Loan Modification Law Center as one of the companies in his sights for investigation. Leibowitz said the company, which has recently launched a massive national radio ad campaign, has no affiliation with the federal government and is a prime example of the type of fraudulent organization the inter-agency taskforce plans to go after.
The FTC has already issued warning letters to 71 companies it says are running suspicious advertisements and has filed official complaints against Federal Loan Modification Law Center, as well as Newport Beach, California-based Bailout.hud-gov.us and Clearwater, Florida-based Home Assure LLC.
Last month, the FTC filed suits against two other companies – Hope Now Modifications LLC and New Hope Modifications LLC – for falsely representing that they were aligned with the government-sanctioned HOPE NOW Alliance and erroneously claiming they secured loan modifications for all clients.
HUD Secretary Shaun Donovan, stressed that free foreclosure assistance and counseling is available to help homeowners take advantage of the government's mortgage relief program. Donovan said, literature outlining legitimate foreclosure assistance is being distributed, starting Monday, to HUD-related partners, including HUD field offices, state housing agencies, and non-profit HUD-approved counselors, among others.
In addition, NeighborWorks, a nonprofit housing and foreclosure counseling group, has plans to launch a $6 million outreach program to alert homeowners of foreclosure rescue scams. And government officials told reporters that several banks, including Chase and SunTrust, are distributing fraud education flyers through their home retention centers and local branches to raise awareness among homeowners.
According to Attorney General Eric Holder, the FBI currently has about 2,100 mortgage fraud cases under investigation, a 400 percent increase from five years ago.
In the press briefing Monday morning, Geithner acknowledged the efforts of Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP). Geithner said Barofsky has been actively working with the Office of Financial Stability to build fraud protections into the government's relief programs, including the Making Home Affordable program.
Geithner noted that Barofsky has a history of successful mortgage fraud prosecutions, and said the Treasury has already adopted Barofsky's recommendation that every modification package include a cover sheet containing fraud warnings and a reference to the special inspector general’s fraud hotline, through which Barofsky's office stands ready to receive any referrals concerning fraud related to the TARP program.
“American homeowners have been through enough over the past two years,” Geithner concluded. “The last thing they need now is to be taken advantage of as they try to hold on to their homes. Today’s announcement underscores that this administration is doing everything we can to prevent that from happening.”

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
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