Athens Review, Athens, Texas

In the News

September 27, 2012

Mortgage settlement attracts scam artists who prey on struggling homeowners

The ink was barely dry on the government's $25 billion mortgage settlement with the nation's biggest banks earlier this year when scam artists seized on the opportunity.

In Alabama, struggling homeowners received calls promising them cash payments from the settlement, if only they would provide the routing number to their bank accounts. In Illinois, they were told they qualified under the settlement for a loan refinancing, but only after they paid a hefty upfront fee. In California, the attorney general herself received a call claiming that she was eligible for aid from the settlement.

"Every time there's a new government program announced - in this case, it's a very large settlement - scam artists use that as an opportunity to defraud people," said Illinois Attorney General Lisa Madigan.

Madigan said her office has seen an "explosion" in such scams since the bottom fell out from under the housing boom in 2006. "As the economy goes, so goes our consumer fraud complaints," she said.

Across the country, the combination of rampant foreclosures, desperate homeowners, record low interest rates and billions in available government aid have created fertile ground for scam artists, who have found new and creative ways to prey on the millions of Americans who owe more than their homes are worth.

State and federal authorities have stepped up efforts to curb mortgage-related crimes. They have hired more investigators and created special task forces. They have ramped up efforts to alert the public to scams. They have held mortgage fraud summits in hard-hit states such as California, Nevada and Florida. They have supported laws to ban the practice of demanding upfront fees from consumers. They have filed hundreds of lawsuits and sent out thousands of cease-and-desist orders to shady businesses.

Despite those efforts, the high levels of fraud persist.

"It's like a game of whack-a-mole," said Patrick Madigan, an assistant Iowa attorney general who headed efforts to negotiate the national mortgage settlement. "You hit one and four more pop up."

No central database tracks cases across every jurisdiction - most consumer complaints are handled by state attorneys general, and only a fraction of cases ever reach federal authorities - but records that are available offer a glimpse at the depth and breadth of the problem.

During the past three fiscal years, the Justice Department has filed nearly 1,500 mortgage fraud cases against nearly 3,000 defendants, according to an agency spokesperson. During that same stretch, the department saw a 92 percent increase in the number of mortgage fraud prosecutions.

FBI agents also have worked on a record volume of cases in recent years. The overwhelming majority used to involve fraud related to the origination of mortgages, but now about 40 percent of the bureau's case load involves homeowner-rescue schemes, said Timothy A. Gallagher, the FBI's section chief for financial crimes.

Some critics argue the authorities haven't yet prosecuted bank executives whose firms' risky behavior precipitated the housing bust and hurt far more homeowners than small-time crooks.

"We have zero indictments coming out of the government's Mortgage Fraud Working Group; every subpoena has been civil," said William K. Black, professor of economics and law at the University of Missouri. (New York Attorney General Eric Schneiderman, who co-chairs the government's mortgage task force, suggested in an interview with Reuters last week that the group might soon take action.)

Still, the lower-level prosecutions show the measured success authorities have had rooting out fraud further down the financial totem pole, particularly when it comes to swindling consumers and lying to banks and regulators.

For instance, they oversaw the indictment of 11 people running a loan modification scheme that allegedly defrauded 4,000 California homeowners out of about $7 million. They nabbed a Florida loan officer who was helping unqualified borrowers get loans by lying on mortgage applications. They secured a prison sentence of more than 7 years for a Virginia man who charged Washington-area homeowners thousands of dollars upfront with false promises that he could help save their homes.

In Nevada,which experienced one of the country's highest foreclosure rates, the authorities are investigating 84 cases of mortgage fraud as of July, compared to 21 cases a year earlier, said Russell D. Smith, the state's chief deputy attorney general. In one case, letters on Bank of America letterhead were sent to homeowners with offers to help modify their loans for $6,000; the offers, of course, were not from Bank of America.

"Some of these criminals are more sophisticated . . . we're seeing people become repeat offenders within the mortgage industry," Smith said.

In Illinois, Madigan's office has filed scores of lawsuits in recent years related to mortgage-rescue scams, as well as sending out more than 700 cease-and-desist letters. "We saw the number of consumer fraud complaints significantly increase at the same time we saw the economic situation significantly decrease," she said.

She said this year's national mortgage settlement, with its promise of billions in help, provided scam artists with yet another vehicle to give themselves an appearance of legitimacy. "Because foreclosures are public filings, you've got people who troll through there to find their targets. Maybe they call you, maybe they send a letter, maybe they knock on your door," she said.

Gallagher, of the FBI, doesn't expect the number of fraud cases to fade anytime soon, not as long as homeowners continue to struggle paying their mortgages.

"The overall number of investigations remains pretty static; however, the types of cases we're seeing have changed," he said. Though in some ways, the more things change, the more they stay they same, he added. "Some of these schemes are no different that what we saw telemarketers do in the late 1980s, claiming that you won prize but had to send money."

 

1
Text Only
In the News
  • How states fared on unemployment benefit claims

    Applications for U.S. unemployment benefits increased slightly last week to a seasonally adjusted 304,000.

    April 17, 2014

  • bomb1 VIDEO: A year after marathon bombing, Boston remains strong

    The City of Boston came together Tuesday to honor those who were injured and lost their lives at the Boston Marathon on the one-year anniversary of the bombing. While the day was sure to be emotional, those affected by last year's race are showing they won't let the tragedy keep them down.

    April 15, 2014 1 Photo

  • Conjoined boys separated at chest to exit hospital

    The conditions of conjoined twins separated last summer have steadily improved, and officials say they'll be released this week from a Dallas hospital.

    April 14, 2014

  • Police: Utah mom admitted to killing her 6 babies

     Authorities say a Utah woman accused of killing six babies that she gave birth to over 10 years told investigators that she either strangled or suffocated the children and then put them inside boxes in her garage.

    April 14, 2014

  • Texas grand jury to be seated in Perry ethics case

     A Texas judge is expected to seat a grand jury in an investigation into whether Republican Gov. Rick Perry abused his power by vetoing funding for public corruption prosecutors.

    April 14, 2014

  • VIDEO: CBS taps Colbert as Letterman’s Late Show successor

    Bloomberg’s Jon Erlichman reports that CBS has announced Stephen Colbert as its choice to replace the retiring David Letterman as host of “The Late Show” on Bloomberg Television’s “Lunch Money.”

     

    April 11, 2014

  • mfp file Hoffner Big win for college coach wrongly accused of child porn

    The ex-coach of Minnesota State University-Mankato - cleared on child porn charges - gets his old job back or could take the difference in pay should he decide to stay in a new position in North Dakota, an arbitrator has ruled. Todd Hoffner was accused when a technician found videos of his young children on his school-issued cellphone. Officials in Mankato fired him even though a judge had thrown out the charges.

    April 11, 2014 1 Photo

  • Mabank’s Cassiddy Petty takes first, second in Dairy Cattle

    Not many agriculture students travel to a county’s stockshow, and wins every place in their particular category.
    But, that’s what happened Wednesday night at the Henderson County Livestock Show with Cassiddy Petty, a senior at Mabank High School, and a member of the Chandler 4-H.

    April 10, 2014

  • Screen Shot 2014-04-10 at 10.25.07 AM.png VIDEO: Cement truck crashes into minivan

    A professor at Texas A&M University was fortunate to escape serious injury recently when a cement truck ran a red light at a College Station intersection and crashed head-on into his minivan. A dash camera that Dr. Guan Zhu had installed about a year ago captured the entire incident.

    April 10, 2014 1 Photo

  • BREAKING NEWS...Authorities investigate East Texas fatal shooting

     An East Texas shooting has left one person dead.

    April 10, 2014

Biz Marquee
AP Video
Raw: More Than 100,000 Gather for Easter Sunday Raw: Greeks Celebrate Easter With "Rocket War" Police Question Captain, Crew on Ferry Disaster Raw: Orthodox Christians Observe Easter Rite Ceremony Marks 19th Anniversary of OKC Bombing Raw: Four French Journalists Freed From Syria Raw: Massive 7.2 Earthquake Rocks Mexico Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Deadly Avalanche Sweeps Slopes of Mount Everest