Rise in loan scams heighten need for outreach

Five years after the housing bubble burst, the caveat “buyer beware” unfortunately remains a fact of life for individuals hoping to re-finance their home or escape a foreclosure.

Although scams reported to the Federal Trade Commission and state attorneys general dipped in 2012 to 8,658, 2013 is seeing a significant uptick. If the current trend continues, the number of home loan scams reported in 2013 will exceed 11,000 – and that’s likely only the tip of the iceberg, since many such frauds are never officially recorded.  Along with the increase in reports is a worrying rise in average loss. According to the Loan Scam Prevention Database maintained by the Lawyers’ Committee for Civil Rights Under Law, the average loss from loan scammers in 2012 was $3,604; so far this year, it’s $4,098.

Barbara Floyd-Jones

Barbara Floyd-Jones, program manager of local support for foreclosure solutions at NeighborWorks America, warned of the dangers of these “wolves in sheep’s clothing” on a recent episode of the nationally syndicated radio program, The Yolanda Adams Morning Show.

Even if the person offering you a so-called great deal is “is a lawyer or sitting with you on a pew in a church,” Floyd-Jones warned, know the signs and “stay away from those kind of people. Not everyone is out to help you. They’re trying to make money off you.” Listen to her interview here.

In fact, the involvement of lawyers is an increasing trend. In 2012, 36 percent of reported scams involved lawyers; in 2013, their share is 45 percent. These shady practitioners are often heard in radio ads, which is why interviews like the one Floyd-Jones participated in are so important.

Recognizing the growing problem with loan scams, the U.S. Congress asked NeighborWorks America three years ago to launch a national public education campaign to empower homeowners to protect themselves through education and trusted referrals. Thus, the Loan Modification Scam Alert website and campaign were created. In addition to online education, it offers a call-in hotline, in operation 24 hours a day seven days a week, in 45 languages.

“By far, the most common scam is asking homeowners to pay a fee upfront or before a loan modification has successfully occurred,” says Floyd-Jones, adding that the most vulnerable targets are senior citizens and minorities for whom English is their second language. “The Federal Trade Commission ruled this practice is illegal in 2010, but most consumers don’t know it.”

3 Ways to Avoid Loan Modification and Foreclosure Rescue Scams

Despite the housing market decline, owning a home is still a cornerstone of the American dream and a key step to building wealth. But did you know that homeowners have lost over $57 million to modification and foreclosure rescue scams since 2009?* 

With Financial Education Month upon us, it’s a perfect time to remind homeowners how to protect themselves from scammers . The Loan Modification Scam Alert campaign has successfully educated millions of Americans about the signs of scams and helped over 22,000 homeowners report scams in the Loan Modification Scam Prevention Network database.  

The trouble is that new programs like the Independent Foreclosure Review and the $25 billion national mortgage settlement, give scammers even more ways to lure vulnerable homeowners with phony promises of assistance. Need evidence?  See this recent warning from New York Attorney General Eric Schneider.  

Do your part to get the word out. Scam tactics change often, but the ways to spot a scam remain constant. Below are the top three ways to spot a scam according to Loan Modification Scam Alert. Please share this information with your partners, family and friends and via email, Facebook and Twitter.

*Original loan modification scam complaint information is compiled and housed in the national Loan Modification Scam Prevention Network Database, which is maintained by the Lawyers’ Committee for Civil Rights Under Law, located in Washington D.C.

New Federal Effort Launched to Combat Loan Modification Scams

NeighborWorks was so pleased to learn yesterday that the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the U.S. Department of the Treasury have joined forces to combat scams targeted at homeowners seeking to apply for the Home Affordable Modification Program (HAMP).

The joint task force issued this consumer fraud alert, which provides vulnerable homeowners with tips for avoiding mortgage modification scams. In addition to providing education programs to protect struggling homeowners, the federal agencies will work together and with law enforcement partners to investigate and shut down these scams, and will ensure the perpetrators pay for their crimes.

This collaborative federal effort strengthens the work we have been doing for the past two years through the Loan Modification Scam Alert Campaign to help vulnerable homeowners recognize the signs of scam and to learn where to turn for legitimate help.

Scam artists hide behind many titles — Loan Modification Consultant, Forensic Foreclosure Consultant, Short Sale Negotiator, to name a few — and they sometimes falsely represent themselves as government programs. Even trusted professionals like real estate agents or attorneys have been involved in loan modification scams.

It can be hard to spot a scammer, so the best way for homeowners to protect themselves is to know the signs. And the best way to shut down these scams is to report them. Legitimate help is FREE and available from a HUD-approved housing counselor.