Senior Citizens Most Likely to be Targeted by
Foreclosure Rescue Scams
Senate Special Committee on Aging hears testimony
on sub-prime crisis
Feb. 13, 2008 – It should be no surprise that
senior citizens are the target of the latest financial scam –
foreclosure rescue scams. At a hearing yesterday of the Senate Special
Committee on Aging, Chairman Herb Kohl said seniors are three times more
likely to have sub-prime mortgage loans than younger borrowers and these
loans have driven the large increase in foreclosures.
“Senior homeowners are particularly vulnerable to
rescue scams because many of them are on fixed incomes and rely on the
equity in their homes as their primary financial asset. They are also
particularly attractive to financial predators because they tend to have
a larger amount of equity in their homes,” Kohl said.
Across the nation, foreclosure filings have
increased by 95 percent in the past year. The hearing reviewed how
rescue scams work, who they impact, and what the government can do to
eliminate the scams.
Foreclosure rescue scams target low-income and
senior homeowners already facing a financial difficulty. Often these
financial predators will claim that they can help “save” the home of a
senior experiencing foreclosure, when in fact they plan to walk away
with both the title and equity of the home.
(Read below news
report - Types of Foreclosure Rescue Fraud)
“The mortgage foreclosure crisis is real. Most
communities across the country are experiencing both the primary and
secondary effects,” said Chairman Kohl. “We need to determine how
federal and state governments can best protect seniors and other
targeted populations from these ruthless financial predators.”
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Foreclosure
Aftermath: Preying on Senior Homeowners
Statements and
testimony links – click on names to read more
Statements of
Committee Members
●
Senator Herb Kohl (D-WI), Chairman
●
Senator Gordon H. Smith (R-OR), Ranking Member
Witness Testimony
●
William Malone, Contractor for Malone and Malone Construction,
Washington, DC
●
Catey Doyle, Chief Staff Attorney, Civil Division, Legal Aid Society
of Milwaukee, Milwaukee, WI
●
Thomas Perez, Maryland Secretary, Department of Labor, Licensing and
Registration, Baltimore, MD
●
John Anderson, Licensed Realtor, Twin Oaks Realty, Minneapolis, MN
(on behalf of the National Association of Realtors)
●
Rachel Dollar, Attorney and Certified Mortgage Banker, Santa Rosa,
CA (on behalf of the Mortgage Bankers Association)
●
Peggy Twohig, Associate Director, Division of Financial Practices,
Federal Trade Commission, Washington, DC
●
Click here to view Webcast.
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Because foreclosure filings are public information,
scammers target the already troubled homeowners, contacting them by
phone or mail repeatedly with claims that they can “save” the home and
help the homeowner remain in their residence.
Often these financial predators lead the homeowner
to believe that there are no other options and advise them not to
contact their lender or seek legal advice. In the end, these predators
walk away with both the title and equity of the home.
Chairman Kohl says he will soon introduce
legislation to help homeowners across the country avoid these
foreclosure rescue scams, especially in states where no law exists to
prohibit or regulate these practices.
Kohl also acknowledged the plan recently announced
jointly by the mortgage industry and administration to help seriously
delinquent borrowers stay in their homes. “While this is a step in the
right direction,” Kohl said, “there are concerns that this help will not
reach as many troubled homeowners as possible.”
The hearing’s first witness, Walter Malone, offered
his personal experience as a rescue scam victim in Washington, D.C. His
case was recently settled with the help of AARP and the attorneys at
Hogan and Hartson.
Catey Doyle, senior staff attorney with Legal Aid
Society in Milwaukee, discussed her experience attempting to litigate
cases on behalf of rescue scam victims and spoke to the difficulties she
has faced in doing so.
Thomas Perez, Secretary of Labor, Licensing and
Regulations for the State of Maryland, portrayed the foreclosures rescue
situation in Maryland, the limitations of their current state law, and
how Maryland’s proposed law differs.
John Anderson testified on behalf of the National
Association of Realtors, offering an industry perspective, and also
talked about how the foreclosures in his area have impacted the
community he serves.
Rachel Dollar, representing the Mortgage Bankers
Association, testified on the topic of lender responsibilities, fraud
against the elderly, and challenges in shutting down schemes.
Finally, Peggy Twohig, Associate Director of the
Division of Financial Practices at the Federal Trade Commission (FTC),
offered testimony about the FTC’s role in preventing foreclosure rescue
scams.
Types of Foreclosure Rescue Fraud
Excerpt from testimony by Peggy Twohig,
Associate Director of the Division of Financial Practices at the Federal
Trade Commission
There are many varieties of mortgage foreclosure
rescue fraud. But in each case, the perpetrator makes misleading
promises that consumers’ homes will be saved from the pending
foreclosure permanently. Consumers, however, ultimately lose their homes
and lose the money they paid to scammers.
The types of mortgage foreclosure rescue fraud are
as varied as the imaginations of the perpetrators. However, there are
several recurring types:
● Title Transfer: The fraudulent operators
orchestrating the fraud may in fact take title to the homeowner’s
property. Two variations on this scheme are:
>> The fraudster represents that the
homeowner is signing documents for a new loan to bring the mortgage
current. The scam artist may forge the deed or slip the deed into a
large stack of documents with extensive fine print as part of a
purported loan closing. Ultimately, the fraudster ends up with a deed
granting ownership of the house, even though the consumer believed he
was only signing documents for a refinance loan.
>> In other situations, the firm informs the
borrower that he needs to sell the home to the rescue company to remain
in the home as a renter. The firm then promises the consumer that he
will be able to repurchase the house over the next few years.
However, rather than allow the homeowner to
repurchase the property, the fraudster typically asserts ownership of
the home outright and evicts the homeowner. In other instances, the
terms of repurchase are so onerous that the firm knows the consumer will
never be able to repurchase the house.
● Mortgage Negotiation: Firms promise borrowers
that, for a fee, they will “save your home from foreclosure” by
negotiating with the loan servicer.
This negotiation is promised to yield either a
temporary decrease in the payment amount or a permanent loan
modification. In the end, however, these firms charge thousands of
dollars and rarely stop the foreclosure.
In some cases, the 28 company promises a full range
of options: credit counseling, debt negotiation, emergency lending
whatever the consumer needs; homeowners pay fees for each of these
“solutions” in turn, even as the lender sends continued notices of
default and begins the foreclosure process.
Frequently, the firms instruct the victims to have
no further contact with the loan servicer, even though servicers will
agree to loan workouts or modifications to avoid foreclosure in some
circumstances.
Most consumers report that when they try to get in
touch with the mortgage foreclosure rescue company, they are unable to
reach anyone to determine how the process of negotiation is going or to
complain. A great number of consumers report that after a long period of
reassurance from the firms, they are at last told to file for bankruptcy
or grant a deed in lieu of foreclosure to the lender.
The vast majority of consumers find to their shock
that their houses end up being foreclosed on. Indeed, many consumers
find after their homes are foreclosed upon that some scammers’
“money-back guarantees” were also fraudulent.
In all of these scenarios, consumers typically
believe that the promise to “stop foreclosure” and “save your home”
means a permanent solution that will allow them to keep their homes and
save their equity.
Yet, they still end up losing their homes.
