Servicing

Legal group sounds alarm on foreclosure rescue scams

Joint report looks at cost and tactics behind fraud

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The Center for NYC Neighborhoods and the national Lawyers’ Committee for Civil Rights Under Law released a joint report on foreclosure rescue scams.

The report, titled “Who Can You Trust? The Foreclosure Rescue Scam Crisis in New York,” combines quantitative data on national trends from the Lawyers’ Committee and qualitative data from focus groups coordinated by the Center.

The report provides an in-depth look at foreclosure rescue scams, as well as recommendations for consumer education and enforcement actions to protect New York homeowners. 

The report highlights some shocking findings about the prevalence of foreclosure rescue scams.

As of September 2014, New York homeowners have submitted over 2,700 complaints to the Lawyers’ Committee’s Loan Modification Scam Database, while over 42,000 complaints have been submitted nationally.

New York homeowners have been conned out of an average of about $4,200 each, well above the national average of about $3,300. And that number does not begin to reflect the incalculable damage done when homeowners are derailed from reaching legitimate help—or having finally reached it, finding that they are too far behind to recover.

All told, homeowners in New York have reported total losses of $8.25 million. Nationwide, homeowners have reported total losses of almost $100 million to scammers. 

Foreclosure rescue scammers also disproportionately target minority homeowners. African American homeowners make up 8% of homeowners in New York, but represent 30% of reported foreclosure rescue scams. Similarly, Latino homeowners own 6% of homes, but are 20% of reported scam. 

The report also highlights the alarming trend of increasing attorney involvement in foreclosure rescue scams. The involvement of real or alleged attorneys in rescue scams has been on the rise, both nationally and in New York:  today, the majority of scams in New York now involve a person who is, or claims to be, an attorney. New Yorkers who were scammed by a company involving attorneys saw an average loss of $5,212 per scam—$1,437 more than the average lost in scams without attorney involvement.

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