Authorities Have Their Hands Full As Real Estate Operators Shift From Equity Stripping Scams To Upfront Fee Loan Modifications

The New York Times reports:

• As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.

• Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans(1) but often do nothing to stave off foreclosure.

• The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more.

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• “There’s no way for the consumer to sort out the legitimate companies,” said [Florida Attorney General Bill] McCollum, who added that he had limited resources to fight what he called “a sheer volume question.” [...] “That’s all I’ve been doing for the last year,” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors. [...] In Colorado, the attorney general’s office has closed 15 mortgage rescue companies that charged fees up front. [...] The [Illinois] attorney general’s office has received “thousands” of complaints about such companies, said Michelle Garcia, an assistant attorney general [...].

For more, see Swindlers Find Growing Market in Foreclosures.

(1) According to the story, there are 21 states that prohibit charging upfront fees for negotiating loan modifications.