Prevent Loan Scams

Publications and Testimony

Foreclosure Rescue Scams: A Nightmare complicating the American Dream

Foreclosure prevention and rescue modification scams present a growing concern for the consumer protection community.  Numerous consumer complaints and NCRC's mystery shopping investigation confirm that companies that pose as "rescuers" are a pervasive threat to community stability and sustainable homeownership. This report identifies common scams perpetrated against consumers, including phantom help, reverse mortgages, title theft, and short sale fraud, and highlights those important red flags that every homeowner must know. In addition, NCRC's findings demonstrate that an aggressive legislative solution and added public and private oversights and enforcement is necessary to prevent consumers from being harmed. 

Over 80% of the companies "tested" in this study gave consumers problematic advice and  offered little or no guarantees for their "professional" services. They quoted consumers an average fee of $2600 for the same services that could be readily obtained from HUD Certified Counseling Agencies or by dealing directly with mortgage servicers. Furthermore, many companies were truly out to scam homeowners, looking to strip equity, steal title, or sell services that would allow the company to profit at the expense of consumers and lead to foreclosure and irreparable harm to the consumers' credit and financial situation. Less than 20 percent followed Federal Trade Commission (FTC) guidance that requires companies to inform consumers of alternatives such as nonprofit organizations that provide foreclosure prevention services for free. In about a quarter of the mystery shopping calls, the shoppers were advised not to pay their mortgage or have any contact with their lender.

Foreclosure modification scams have been a problem for years. However, with the recent increase in foreclosures, scams have become more prevalent and present a significant consumer protection concern.

Results of "mystery shopping" of 115 foreclosure prevention service providers:

  • 17 of the loan modification were found to have invalid numbers, indicative of the "fly-by-night" nature of the industry;
  • At least half of the servicers discussed fees - media $2,900; average $2,600;
  • Only 20% offered referrals to non-profit and government free resources;
  • Most companies did not state their actual service area;
  • Most servicers made allegations that they have successfully helped 98% of their clients;
  • 50% of the time homeowners were told to not pay their mortgage and to not contact their lender with additional information; and
  • Only 50% of the time did the servicers request the correct support documentation necessary for a proper loan modification.

Major Legislative Initiatives:

  • Rep. Gwen Moore (D-WI-4) introduced the Foreclosure Rescue Fraud Act of 2009, HR 1231 placing restrictions on "foreclosure consultants"

 FTC has filed Complaints against the following:

  • Federal Loan Modification Law Center;
  • Home Assure d/b/a Expert Foreclosure; and
  • FTC sent letters to 71 companies that are marketing potentially deceptive mortgages modification / foreclosure assistance programs.

 Click here to access the Neighborhood Community Reinvestment Coalition report, Foreclosure Rescue Scams: A Nightmare complicating the American Dream