Feds To Fight Mortgage FraudThe Justice Department, U.S. Treasury and other agencies on Monday said they will aggressively go after those "bottom feeders" of the mortgage industry who prey on borrowers facing foreclosure.
The efforts announced in a news conference in Washington, D.C., will combat fraudulent schemes that are promoted as official government programs include filing civil lawsuits, educating homeowners about mortgage-relief scams and directing borrowers to "legitimate" counseling services, according to a statement today. The Housing and Urban Development Department, Federal Trade Commission and state officials will also joing the Treasury department.
Treasury Secretary Timothy Geithner says even as the administration steps up aid to help homeowners, those who want to prey on the most vulnerable are also increasing their tactics, through mortgage-modification and foreclosure-relief companies.
President Barack Obama's program will help as many as 9 million American refinance or modify their mortgage has been targeted by companies with deceptive names and logos that mislead borrowers into paying for assistance that is never provided. The FTC said it sent warning letters to 71 companies running suspicious foreclosure-rescue operations.
FTC Chairman Jon Leibowitz calls these companies the bottom feeders of the foreclosure crisis, and are kicking people when they're down, charging enormous upfront fees and sabotaging efforts by homeowners who could be getting help for free," Leibowitz charges. Leibowitz also announced five civil cases, including a lawsuit filed today that seeks an emergency court order to stop the operations of the Federal Loan Modification Center in Irving, CA. He says this company is an example of one that promised mortgage relief or foreclosure rescue services but did little or nothing to help people stay in their homes.
The economic crisis has sparked an increase in criminal fraud, including an "exponential rise" in mortgage scams that is straining the FBI's resources, according to Deputy FBI Director John Pistole's testimony at a Senate hearing earlier in February. The FBI has more than 1,800 open investigations of mortgage fraud, double that of 2006.