Federal and state officials are cracking down on foreclosure-rescue scams, the Obama administration said yesterday as it pledged to take on scams that target borrowers who are trying to save their homes. The Justice Department, the FTC, HUD, and state and local law enforcement will align their responses to these scams to protect homeowners, federal officials said.
The Treasury Department’s Financial Crimes Enforcement Network is issuing an advisory to help lenders spot loan-modification scams. “The Department of Justice’s message is simple: if you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you,” said U.S. Attorney General Eric Holder.
While the press conference didn’t mention anything about reverse mortgages, I’d expect the FTC to start taking action against companies in the reverse mortgage business soon.
FTC chairman Jon Leibowitz said its already brought cases against five companies. Four of the cases name companies which use "copy-cat names and logos" to try to trick homeowners into thinking they’re working with legitimate government agencies. He added that the fifth case calls itself the "Federal Loan Modification Center" even though it has no federal connection.
We continue to see companies using marketing materials that portray HECMs as a government benefit or offer. There have been ABC 7 specials about it and the state of Massachusetts issued a cease and desist against a company last year for the same thing.
This week, I saw a company using an envelope which was mailed from the “HECM Benefits Division” and portrays itself as a government agency. Inside was letter which told the borrower they’ve been chosen to receive government benefits through a reverse mortgage.
This will be the next big media blow up for reverse mortgages if companies don’t start thinking about what they’re doing and stop.