Foreclosure Rescue Scams Coming on Strong

CU360
May 4, 2009 | COMMENTS

Homeowners having a hard time making their mortgage payments are now the targets of loan modification or foreclosure "rescue" schemes, which take advantage of those in desperate situations. Under the pretense of helping homeowners modify their mortgage obligations, these schemes actually result in loss of money, equity, and—in many cases—the home itself.

The Financial Crimes Enforcement Network (FinCEN) recently issued an advisory (FIN-2009-A001) to highlight rescue scams so financial institutions can help identify and report illicit activity. Financial institutions might encounter these loan modification scams in two ways.

Those perpetrating the scams might seek the services of credit unions or banks to receive, deposit, or move funds relating to the scams. Financial institutions might become aware of the scams through their interactions with members or customers who have become victims. (See the sidebar for a list of potential indicators of third-party scam attempts.) Management and staff are advised to watch for examples of member behavior that could indicate a foreclosure-rescue scam:

• Homeowners tell the mortgage servicer, perhaps upon receiving an overdue notice, that they've been making payments to a party other than the mortgage holder or servicer. The homeowners may have been tricked into signing a quit claim deed or told to make payments to a third party who will allegedly forward them to the lender.
• Homeowners say they've hired a "foreclosure specialist" or "mortgage specialist" to help them avoid foreclosure or help renegotiate the terms of the mortgage.
• Homeowners say they paid someone to assist in getting help from a federal affordable housing program.
• Homeowners maintain they don't need to pay a mortgage because the loan contract is invalid, or a member attempts to pay with a bogus sight draft, Federal Reserve Bank/Treasury letter, or check that accesses a "Treasury Direct Account." They may have been duped by individuals who claim government-related contracts are illegitimate. Other homeowners may have unsuspectingly paid for illegitimate or bogus pay-off documents.

In many circumstances, notes FinCEN, the homeowner is a victim of the scam and should not be listed as a suspect unless there's reason to believe he or she knowingly participated in the fraud. But even if the homeowner appears to be simply a victim, including information about the person and the property in the Suspicious Activity Report will help law enforcement investigate potential crimes.

Resources and Reporting

Information on foreclosure rescue scams, and mortgage fraud in general, can be found in the four mortgage fraud related strategic analytical reports produced by FinCEN and available at fincen.gov . Direct questions or comments regarding this advisory to FinCEN's Regulatory Helpline at 800-949-2732.

If a financial institution becomes aware of a customer's unintentional involvement in a foreclosure rescue scam, the customer may be referred to the Federal Trade Commission Web site, ftc.gov . Also consider referrals to state or local authorities.

More information about the Administration's new loan modification and refinancing programs is available at MakingHomeAffordable.gov or by contacting the Homeowner's HOPE Hotline at 888-995-4673.