WE’RE HEARING...That recent publicity surrounding high-profile convictions involving foreclosure rescue scams may be obscuring some good news: the prevalence of this type of fraud seems to be waning.
Within the last month, convictions and sentencing actions related to foreclosure rescue scams have been reported in California, Florida, Ohio, and Texas, a web search reveals. In one case, two
But out in the marketplace, a combination of enforcement actions, education campaigns and an improving housing market seems to be shutting down the shady side of the “foreclosure rescue” business.
Rick Harper, senior vice president and director of housing at the Consumer Credit Counseling Service of San Francisco, said his agency is not seeing nearly the volume of complaints about foreclosure scams that were coming in at the height of the crisis in 2009 and 2010. Lower delinquency rates and a vigorous public relations campaign to educate consumers about foreclosure rescue schemes have helped to alleviate the problem, he said.
Also, state and federal laws and regulations have been beefed up to protect consumers. In California, for instance, legislation was enacted that says consumers cannot be asked to pay for services in advance of their delivery, though attorneys may have an exemption to that rule.
However, Harper told me consumers should be wary of law firms that are charging for foreclosure help, saying there is not really much a law firm can do to help a homeowner retain their property that a nonprofit credit counseling agency cannot do except file litigation.
Harper also said that widespread publicity about foreclosure and loan modification scams have educated the public and made consumers more wary of foreclosure rescue promises. He credits nonprofit agencies, government entities and the mortgage industry for helping steer consumers away from shady foreclosure rescue operators.
Still, he said some consumers remain inclined to pay for help that they could probably get for free from a non-profit credit counseling agency such as the
“A lot of people are of the mindset that if it’s free, it can’t be worth anything, so they would rather pay thinking they will get more bang for their buck.”
He advices consumers to walk away from any offer that asks them to pay something to resolve their mortgage delinquency problem, unless the request comes directly from the consumer’s mortgage servicer. While outright foreclosure rescue scams seem to be waning, Harper still advices consumers to be cautious in the short-sale process, especially if they are offered a “deed your house to me and we can work out a better deal” type of offer. He said consumers need to work with reputable short sale real estate brokers and asset managers to make sure they aren’t steered into a disadvantageous transaction.
He said foreclosure rescue scams were most common in neighborhoods were English is not the first language of most households. In the CCCSSF’s service area, the scams often targeted Filipino and Spanish speaking areas, he said. For that reason, he said it’s been important for consumer advocates to get the message out to those communities in their own language.
Still, fraud schemes have a tendency to reemerge from time to time. And despite the many plea deals and convictions that state attorney generals and the HUD OIG office have announced involving foreclosure rescue and loan modification scams, some of the scammers remain in business.
The Minneapolis StarTribune
Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.
