The Obama administration has already unveiled its plan to stem the rising home foreclosure rate, but with foreclosure scams also increasing, the administration today announced a multi-agency effort to crack down on scams that prey on struggling homeowners.
"Just as this administration has intensified our efforts to help American homeowners, those who would seek to prey on the most vulnerable are intensifying their tactics as well, often through purported mortgage modification and foreclosure relief companies," Treasury Secretary Tim Geithner said at an announcement in Washington. "These are predatory schemes designed to rob Americans of their savings and potentially their homes."
The FBI is currently investigating more than 2,100 mortgage fraud cases, up 400 percent from five years ago.
Joined by state and federal officials, including Attorney General Eric Holder, Geithner unveiled new initiatives to stop these schemes.
"We will shut down fraudulent companies more quickly than before," he said. "We will target companies that otherwise would have gone unnoticed under the radar. And we will aggressively pursue individuals involved in mortgage rescue scams."
He announced that the Treasury Department's Financial Crimes Enforcement Network will ratchet up its efforts to identify fraud suspects for civil and criminal investigation and issue an advisory to help financial firms flag questionable modification schemes for law enforcement.
Holder said the FBI has more than doubled the number of agents investigating mortgage fraud cases and created a national mortgage fraud team.
"The message is very simple: If you prey on vulnerable homeowners with fraudulent mortgage schemes or discriminate against borrowers, we will find you and we will punish you," he said.
Holder noted that the Justice Department is hearing a growing number of concerns about discrimination by loan modification companies.
"Discrimination in lending on the basis of race, national origin or other prohibited factors is destructive, it's morally repugnant and it is against the law," he said.
Combating Copycat Logos and Names
Federal Trade Commission chairman Jon Leibowitz said his agency sent warning letters to 71 companies running suspicious ads and today announced five new cases of companies that allegedly promised mortgage relief or rescue help, but delivered no such thing.
Four of these five companies allegedly used copycat logos and names -- like Federal Loan Modification -- to lure homeowners in need of help.
"If you pay them instead of your mortgage company, you will find yourself on the fast track from distress to disaster," Leibowitz said.
"Stay away from anyone who says they will save your home in return for money up front," said Illinois Attorney General Lisa Madigan.
Shaun Donovan, secretary of the Department of Housing and Urban Development, noted that participating in President Obama's Making Home Affordable plan is free of charge and urged distressed homeowners to go to the program's Web site, contact one of the 2,600 HUD-approved mortgage counselors or call the HOPE hot line for help.
Despite today's announcement being billed as a news conference, the officials took no questions and departed immediately after a brief series of opening remarks.
The announcement was applauded by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who warned in February that the administration's mortgage modification plan could be vulnerable to illegal schemes. On Barofsky's recommendation, the administration issued an anti-fraud release to warn homeowners about fraud and refer them to a national hot line.
"We applaud Secretary Geithner's leadership in taking these crucial steps to protect homeowners," Barofsky said in a statement. "And indeed the anti-fraud cover sheet has already resulted in referrals to Sigtarp's hot line and have led to active criminal investigations."
Government Initiatives Aim to Stop Scams
The multi-agency crackdown is the latest in a growing number of government initiatives to stop these scams. This week the Federal Reserve Board will start airing a 30-second ad in movie theaters in the seven states hit hardest by foreclosures, pointing people to the Fed Web site for tips on getting help to avoid foreclosure.
The 30-second spot states: "Having trouble keeping up with your mortgage payments? Are you facing foreclosure? Before you do anything, you need to get information on how to avoid foreclosure scams. Don't get taken advantage of. It shouldn't hurt to get help. Go to FederalReserve.gov and click on 'Five Tips for Avoiding Foreclosure Scams.' Learn how to protect your home and avoid foreclosure fraud. It's information you can trust from the Federal Reserve. Go to FederalReserve.gov and click on 'Five Tips for Avoiding Foreclosure Scams.'"