Nearly half the victims of mortgage loan modification scams are of African-American, Hispanic, or Asian descent, according to statistics released by the Homeownership Preservation Foundation (HPF), an independent national non-profit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure since 2004. Nearly one-in-four of the possibly fraudulent scams reported were in California.
Since February 2010, the Homeownership Preservation Foundation (HPF) has operated a specialty unit of their Homeowner’s HOPE Hotline (888-995-HOPE), a resource for financially distressed homeowners. The unit focuses on those who believe they have been victimized by a scam or have been approached by someone offering related services they suspect are fraudulent. Virtually half of the calls fielded since the hotline was launched were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian.
“Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Colleen Hernandez, chief executive officer of the HPF.
the state of California leads all states in possible fraudulent activity, accounting for 22 percent of the calls. Florida was the second highest with seven percent, followed by Texas with five percent, New York with five percent, and Georgia with four percent.
Miami ranked highest among cities for reported scams, followed by Los Angeles, Las Vegas, Houston, and Chicago. Interestingly, while California’s reported fraudulent activity was significantly higher than other states, only one city from the Golden State ranked in the top five, indicating that purported scam activity isn’t concentrated in any one area.
The Federal Trade Commission (FTC) issued a rule in early 2011 prohibiting the payment of any upfront fees to negotiate mortgage reduction payments on behalf of a homeowner. Nevertheless, an untold number of companies and individuals continue to openly and flagrantly violate the rule, asking on average for an upfront fee of $2,589.58 to modify a mortgage. In virtually all instances, either no mortgage reduction was achieved or no work was actually performed.
“It is alarming that an FTC rule intended to curtail mortgage scams is having a limited impact,” said Hernandez. Further complicating the situation, Hernandez noted that the FY 2011 budget recently enacted completely removes federal funding for housing counseling, originally funded at $88 million. This development will invariably lead to a dramatic surge in mortgage scams as counseling has proven to be a major deterrent to foreclosure rescue scams.
“Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners,” Hernandez said. “Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered.”
Hernandez says that companies demanding upfront fees to renegotiate mortgages are often run by individuals who were responsible for facilitating highly dubious mortgage loans during the housing bubble. Hernandez cited a comment by Illinois Attorney General Lisa Madigan, who said at a recent seminar on foreclosure rescue scams, “I have yet to come across a legitimate loan modification organization that charges upfront fees for their services.”