Feds And States Get Tough On Scams

Officials crack down on mortgage related fraud

By Mark Huffman
ConsumerAffairs.com

September 18, 2009

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Scams are nothing new. Federal and state governments working together to combat them, however, is a more recent development.

In the last few months federal regulators and state attorneys general have shown a new aggressiveness in dealing with economic crimes aimed at consumers. Foreclosure rescue and other mortgage related scams have drawn special attention.

"A clear lesson of this financial crisis is that American consumers need better protection against fraud," said Treasury Secretary Tim Geithner. “And while we will prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond. The Obama Administration is acting preemptively, across federal agencies and alongside state governments, to stop consumer fraud."

Treasury, Financial Crimes Enforcement Network, the U.S. Department of Justice, the Department of Housing and Urban development and the Federal Trade Commission have recently committed to taking proactive measures to curb abuse by coordinating information and resources across agencies to maximize targeting and efficiency in fraud investigations. This includes alerting financial institutions to emerging schemes, stepping up enforcement actions and educating consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.

"Our efforts to attack mortgage fraud must be, and are, concerted and coordinated," said Attorney General Eric Holder. "Working together, we can send a clear and straightforward message: Those who prey on vulnerable American homeowners cannot hide from the hand of the law. If you perpetrate mortgage fraud, we will find you and we will bring you to justice."

Mortgage "Rescuers" • Florida Attorney General Warns Big Banks On Modifications • Ohio Sues Mortgage Servicer For 'Incompetence' • Brown Challenges Banks On 'New Wave' Of Foreclosures • California Law Cracks Down On Foreclosure Rescue • Feds And States Get Tough On Scams • FTC Continues Crackdown On Mortgage Relief Scams • Florida Sues Foreclosure "Rescuer" Targeting Hispanics for Fraud • Class Action Proceeds Against Debt-Relief Scam • States Increase Pressure On Foreclosure Consultants • New York Sues Loan Modification Company • California Puts Foreclosure Consultants On Notice • Mortgage Modification Program Off To Slow Start • Florida Sues Four Foreclosure Rescuers • California Sues Dozens Of Mortgage Rescue Scammers • Don't Put Your Hopes, Or Money, In A Loan Modification • Ohio Launches Foreclosure Rescue Crackdown • Feds Look at Tougher Foreclosure 'Rescue' Rules • California Seeks To Register Foreclosure "Consultants" • FTC Slams Fake Government Loan Rescue Operation • Ohio Puts Heat on Foreclosure Rescue Operations • California Foreclosure ‘Rescue’ Defendants Rounded Up • Missouri Joins Mortgage Scam Smackdown • Florida Targets Fraudulent Foreclosure "Rescue" • Florida Foreclosure "Rescue" Company Shut Down • Illinois Sues Seven Companies for Mortgage Rescue Fraud • California Busts Foreclosure Scam Ring • Florida Sues Foreclosure Rescue Company for Deceptive Practices • Mortgage Rescue Fraud Schemes On The Rise • Indiana Charges Mortgage Broker With Scamming Homeowners • Indiana Targets "Foreclosure Consultant" • Missouri Attorney General Takes on Foreclosure Scams • New Washington Law Protects Distressed Home Sellers • Foreclosure 'Rescue' Firm To Pay $1.2 Million To Arizona Victims • Florida Governor Signs Foreclosure Rescue Law • California Busts 'Land Grant' Foreclosure Scam Artists • California Shuts Down Mortgage Scam Artists • FTC Takes On Mortgage 'Rescue' Operations • Illinois Uses New Law to Sue Mortgage Rescue Company • Washington State Settles with Mortgage "Rescuers" • Scams and Foreclosures On the Rise • Illinois Sues Mortgage "Rescue" Companies • Mortgage Crisis? Act Now to Avoid Foreclosure • North Carolina Shuts Down Mortgage "Rescue" Operation • Illinois Shuts Down Mortgage "Rescue" Scam • Indiana Fines Mortgage "Rescue" Firm • Illinois Sues Another Mortgage Foreclosure "Rescuer" • Missouri Sues Foreclosure "Rescue" Business • Illinois Launches Offensive Against Foreclosure "Rescuers" • New York Takes On Predatory Real Estate Scams • Texas Halts Bogus Foreclosure Rescue Operation

Geithner and Holder were among the officials meeting this week with 12 state attorneys general to compare notes on their respective anti-scam efforts. The officials reviewed emerging trends and proactive strategies to combat fraud against consumers in the housing markets as well as best practices to bolster coordination across state and federal agencies.

Meanwhile, the FTC announced two new law enforcement actions in a continuing crackdown on mortgage foreclosure rescue and loan modification scams, bringing to 22 the number of these cases the Commission has filed since the housing crisis began. The FTC also announced developments in similar pending mortgage-related actions, several of which have involved coordinated case work from FinCEN.

Connecticut Attorney General Richard Blumenthal said his state has adopted a landmark ban on upfront fees for mortgage repair schemes -- a model, he says, for national action in the battle against exploitation of consumers seeking to save their homes.

"Homeowners should never pay an upfront fee for help with negotiating a loan modification," said Illinois Attorney General Lisa Madigan. “If you’re asked to pay an upfront fee, that’s a sure sign you’re dealing with a scavenger whose only goal is to con you out of money you can’t afford to lose, and who will ultimately rob you of any opportunity to save your home with the help of legitimate organizations."

Michigan victims get refunds

In Michigan, Attorney General Mike Cox says residents of his state victimized by foreclosure fraud schemes can receive refunds as a result of charges filed against SaveMyHome USA, Payment Doctors and the Michigan Economic Reinstatement Program. The companies were held accountable after an undercover investigation by the Attorney General's office discovered that the companies' representatives made misleading statements and charged borrowers upfront fees in violation of the Michigan Credit Services Protection Act.

"Families already facing a foreclosure crisis should not have to worry about being ripped off in the process," said Cox. "This sends a clear message to scam artists that we are watching."

The companies offered mortgage modification assistance to homeowners facing foreclosure. They claimed they would help homeowners by working with their lenders in an attempt to modify the borrower's mortgage.

However, an undercover investigation by the Attorney General's office discovered that the companies charged borrowers upfront fees, a practice prohibited by law. After paying the upfront fee, many borrowers found that the companies could not secure a modification and were subsequently unable to get their money back.

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