Foreclosure Scams: A Growth Industry
(Originally posted on Caveat Emptor)
One consequence of this hasn’t received as much attention as it deserves. As growing numbers of desperate homeowners are unable to get the help they need from their loan servicers, more and more are succumbing to the aggressive sales pitches of for-profit loan modification scammers that promise expert help in exchange for hefty upfront fees. Almost always, these companies fail to deliver any assistance, and the homeowners end up even closer to losing their homes.
This problem is illuminated in a hard-hitting report that the National Consumer Law Center issued last month: Desperate Homeowners: Loan Mod Scammers Step In When Loan Servicers Refuse to Provide Relief (pdf). Authors Lauren Saunders, Andrew Pizor, and Tara Twomey summarize the underlying problem in the loan servicing industry that has created the vacuum enabling the loan modification scammers to flourish; they describe the scammers’ predatory practices; and they outline the needed legislative and regulatory responses at the state and federal level. If you don’t have time for the entire report, here’s a two-page summary.
Until the foreclosure rescue scammers are put out of business, however, it’s important that homeowners – especially desperate homeowners – become aware of the dangers associated with engaging in this kind of scheme. Three federal agencies provide helpful materials on this topic. The Federal Reserve offers “Five Tips for Avoiding Foreclosure Rescue Scams”; the Federal Trade Commission has issued its own warnings; and one of the links on HUD’s general “Guide to Avoiding Foreclosure” page links to a page on foreclosure scams. These should all be distributed as widely as possible.