U.S. Cracking Down On Mortgage Scammers

(AP)  Top federal and state officials on Monday announced a broad crackdown on mortgage modification scams, accusing "criminal actors" of preying on desperate borrowers caught up in the nation's housing crisis.

Government officials say scammers are seeking to take advantage of borrowers in danger of default by charging them upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.

The frauds often involve companies with official-sounding names designed to make borrowers think they are using the Obama administration's efforts to help modify or refinance 7 million to 9 million mortgages.

Officials say such operations almost always are fraudulent, and that help is available for free from government-approved housing counselors.

"These predatory scams callously rob Americans of their savings and potentially their homes," Treasury Secretary Timothy Geithner said. "We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar."

The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements. The agency also said it filed three new complaints against Northridge, Calif.-based Federal Loan Modification Law Center LLP, Newport Beach, Calif.-based Bailout.hud-gov.us, and Clearwater, Fla.-based Home Assure LLC, and the operators of those companies.

The FTC last month filed cases against two other companies: Hope Now Modifications LLC and New Hope Modifications LLC.

Attorney General Eric Holder says the FBI is investigating about 2,100 mortgage fraud cases, a 400 percent increase from five years ago.

"If you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you," Holder said.

Over the past year homeowners have been flooding state attorneys general with complaints about for-profit loan modification consultants. While some are legitimate, authorities say many are con artists.

"Stay away from anyone who says they will save your home in return for money up front," Illinois Attorney General Lisa Madigan told reporters in Washington. Such claims, she said, "are almost always scams."

Homeowners do not have to pay anything to participate in the administration's Making Home Affordable program, which seeks to prevent foreclosures by making mortgages affordable through refinancing or modified terms.

Other signs of a mortgage scam, according to the FTC are: promises to stop foreclosure or modify a loan; guarantees that your home will be saved and claims of a "97 percent success rate;" and use of official-sounding names.

Roadside billboards in places like Las Vegas scream, "Save my property!" and radio ads promise "expert help." Some companies comb property records and send mail designed to look like it is from the homeowner's lender.

Some of those making the offers to help are former brokers, agents and appraisers who've seen their previous business evaporate. But it's difficult to gauge if even the legitimate consultants are more effective than nonprofit credit counselors who also work with lenders at no charge.

Some states recently have toughened penalties for perpetrating foreclosure scams, and some prosecutors have used existing fraud statutes to bring criminal charges. But many state prosecutors have not filed criminal cases, instead proceeding with civil lawsuits.

Homeowners can locate free housing counselors at www.makinghomeaffordable.gov or by calling (888) 995-HOPE.

[wardoglrs]

Proof that Government hates competition

[sjc_1]

Cracking down is an after the fact action. If the customers had knowledge of government approved agencies before had, you would not have the scams in the first place. Make it known that the mortgage company is working with the government. If they do not pass that test, do not deal with them.

[jsd330]

This is why all the mortgage brokers are jumping ship and becoming insurance agents.
Now you'll have to watch for insurance scams.

[hawksprings]

It sounds like it's going to be as effective as the last time the government stepped in to help....I think they reported 5 people, nation-wide, benefited....and it was a fraction compared to this one. There will be billions wasted and unaccounted for when it's all said and done...which will be years after Obama leaves office. They've even admitted up front that 1% (1% of a trillion $) may be wasted and will get all the attention over the 99% expected to be spent responsibly. Well...in your experience...how many government programs over the last 50 years have been 99% effective and operated as designed? Exactly....
Posted by poeticaintit

Obama's from the government and he's here to help.

[scottyusa]

These guys are the lowest oif them all. Preying on people when they are down and out. How do these jerks sleep at night?

[sndkzyaa]

I wonder why no one thought of it the last eight years????
Posted by hatesthecolt at 10:19 AM : Apr 6, 2009

Barney Frank was against it. He said it would interfere with affordable housing.

Yes, he actually said that in a NYT interview in 2005.

The WSJ reprinted the article when the Fannie/Freddie meltdown occurred.

But liberals pretend they didn't hear about it.

[sndkzyaa]

Not a word about freddie mac and fannie mae bonuses to day why are the obamabots not out for blood today
Posted by bumpedoff1 at 8:56 AM : Apr 6, 2009

Thanks for reminding me!

Do a news search on "Fannie Mae" and read the story from 4/3 titled: Fannie, Freddie To Pay $210M In Bonuses

The Democrats are handing out another free pass.

Just like Clinton did for Madoff, who was a major contributor to the Clinton campaign.

[ianlou]

Cracking Down On Mortgage Scammers is anti-capitalistic.
Protecting the masses from the flim flam man is socialism.

Shame on you Obama for interfering with the milking of the sheep.

[hatesthecolt]

Well, this was a tough decision to make. I wonder why no one thought of it the last eight years????

[gold_standard]

The government is running a legal loan modification scam.