By John Breyault, Vice President of Public Policy, Telecommunications and Fraud
Last week, the U.S. Treasury Department, along with the Federal Trade Commission, Department of Justice, Department of Housing and Urban Development, and the Attorney General of Illinois announced an unprecedented crackdown on mortgage fraud and foreclosure rescue scams. The State of Illinois filed two lawsuits and the FTC announced five new enforcement actions against companies engaged in fraudulent mortgage modification and foreclosure rescue schemes. The FTC warned dozens more companies about potentially deceptive trade practices related to such activities.
The bursting of the housing bubble has left millions of Americans searching for ways to deal with the increased costs of adjustable-rate or “balloon” loans and stave off foreclosure. Unfortunately, fraudsters see this misery as an opportunity to take advantage of desperate victims and fleece them as exactly the time these consumers can least afford it. The unfortunate reality of these scams is that thousands of consumers end up financially ruined and often out on the street.
While we certainly welcome stepped-up enforcement by federal and state authorities, we believe that such action often comes too late for victims of such scams. Who knows how many consumers could have avoiding becoming fraud statistics if they had been armed with information to help them spot these scams and take advantage of the legitimate resources available to help them negotiate with their creditors and avoid foreclosure?
With this in mind, NCL last week called on the nation’s leaders to place a renewed emphasis on consumer education to empower consumers to avoid mortgage modification, foreclosure rescue, and other forms of mortgage fraud.
Said NCL Executive Director Sally Greenberg:
“Recent multi-agency federal and state actions to tackle the threat of mortgage fraud are a positive step in helping to protect consumers. Fraudsters should be apprehended and brought to justice. All too often, however, victims of these schemes have already been ruined financially by the time mortgage fraud rings are broken up by law enforcement. Now, more than ever, enforcement should be tied to prevention by devoting more resources to educating consumers through churches, community centers, senior centers, schools, and libraries. This is needed particularly in vulnerable low-income, elderly, and immigrant communities, whose members are frequent targets for mortgage fraud.”
Last week, the Treasury Department stated that from July 2002 to June 2008, it had received nearly 180,000 reports suspicious activity related to potential mortgage fraud. While these statistics are shocking, it is likely that thousands more instances of such fraud go unreported. Enforcement against scammers is an important part of the fight against mortgage fraud, but it should not be the only part. For the vast majority of consumers, their homes are the biggest investment they will ever make. They should be empowered with information, through coordinated widely available consumer education efforts to avoid losing those investments to scam artists.