WASHINGTON – 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. The frauds often involve companies with official-sounding names designed to make borrowers think they are taking advantage of the Obama administration’s efforts to help modify or refinance 7 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 Monday. “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 and has filed five new civil cases to halt illegal loan modification scams. Attorney General Eric Holder says the FBI is investigating about 2,100 mortgage fraud cases.
“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.
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.
By Alan Zibel, Christopher S. Rugaber