Texas AG Wants Crackdown on Foreclosure Rescue Scams
It was bound to happen: as the number of troubled homeowners has increased exponentially, so too have the number of profiteers looking to prey on a homeowner's desire to avoid foreclosure. Foreclosure rescue scams -- always a threat in long-depressed areas in Ohio and Michigan -- are now among the fastest-growing areas of problems for servicers who specialize in managing troubled mortgages, according to various sources in the market that have spoken with HousingWire. Texas Attorney General Greg Abbott in December introduced a unique proposal that would place new restrictions on foreclosure prevention consultants -- something that other states, including California, are considering putting into place as well. “At a time when regulators, policy makers and stakeholders are working to help struggling families, unscrupulous operators are scheming to profiteer at homeowners’ expense,” Abbott said. “Too many scam artists attempt to target homeowners with large fees and the false promise that they could help Texans avoid foreclosure on their homes." Abbott, who proposed the Foreclosure Rescue Fraud Prevention Act alongside state sen. Craig Estes, R-Wichita Falls, says states need more power to crack down on bad actors in the foreclosure prevention space. The Act would require foreclosure prevention consultants to provide customers a written, plain language contract memorializing their services agreement. It would also require that these consultants obtain their customers’ written consent, in the form of a signature, before beginning any services or accepting any fees. An additional requirement mandates a written disclosure statement instructing homeowners to contact an attorney or a housing counselor before signing mortgage rescue agreements. “While most homeowners may never feel the threat of home foreclosure, it is an issue that can impact all of us when it strikes our neighbors, friends, and family,” Estes said. “This issue has impacted constituents in my district and across the state, we are here today to send a very clear signal that these actions by unscrupulous mortgage foreclosure consultants will not be tolerated.” The written agreements mandated by the proposed law would apply to both foreclosure prevention consulting and equity purchase contracts. Both types of agreements would have to include plain language cancellation procedures. In addition to new disclosure requirements, the proposal would place new limits on equity purchase agreements. To protect Texans’ interest in their homes, the law would require equity purchase agreement buyers to pay at least 82 percent of the property’s fair market value. AG Abbott said that the issue of foreclosure rescue fraud came to the forefront for his office in a recent case involving Arizona-based Abell Mediation, Inc., and its president and vice-president, Elizabeth Cory and Michael Cory. Both were charged with fraudulently claiming that their company could save homeowners from imminent foreclosure; under a settlement agreement, the defendants were required to pay $1.55 million in fines and are permanently banned from conducting their business within Texas borders in the future. Of course, foreclosure rescue scams aren't the only sort of fraud -- or simple incompetence -- being seen on the servicing side of the mortgage business these days. A fair number of companies now claim to have expertise in helping servicers perform bulk loan modifications, if the volume of press inquiries HousingWire has received to date are any indication. There's only one slight problem here: nobody has ever actually run a bulk loan modification program, prior to this crisis, since such programs didn't exist prior to recent announcements by lenders and servicers. Write to Paul Jackson at email@example.com.