MBA: Educate, Don't Legislate, to Stop Loan Mod Fraud

Education and existing law might be better ways to tackle loan modification fraud than new legislation, given the potential for "unexpected interpretations" of the latter, a Mortgage Bankers Association executive testified before a House subcommittee. The House Financial Services Subcommittee on Housing and Community Opportunity held a hearing in Washington Wednesday to examine the need for federal legislation to prevent foreclosure rescue fraud and loan modification scams. MBA chairman-elect Robert E. Story, Jr., testified before the subcommittee, stating that — although the MBA shares the subcommittee's concerns about the rapid rise in loan mod and foreclosure rescue scams — it does not believe that new laws are needed to investigate and prosecute these fraud schemes. "Unlike new legislation, which always carries with it the risk of unexpected interpretations, existing law is tested by years of judicial precedent and can be applied by federal law enforcement officers with confidence," he said. According to Mr. Story, the MBA believes educating borrowers on how to identify and avoid foreclosure rescue scams and increasing law enforcement officials' level of resources will be more effective. "MBA believes the first way to stop this fraud is by raising awareness of these scams," said Mr. Story.