Twenty distressed homeowners received offers of help to restructure their troubled loans from a “service” company operating out of glossy Orange County, California, prosecutors say.
For people trying to survive hard economic times, the prospect of lower mortgage payments was welcome news. But it was all a scam, prosecutors allege, and victims who paid upfront for the help that never came each lost an average of about $5,000.
Seven defendants have been charged with crimes including grand theft, money laundering and unlawful loan modifications and await trial. If they are convicted, their alleged misdeeds would be just the tip of an iceberg that often sinks older Americans struggling to hold onto their homes amid a pile of bills.
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Authorities sound the alarm
Today federal regulators and law enforcement officials are actively warning consumers about these types of solicitations, which often come from low-rent boiler rooms where scammers use call lists targeting older, vulnerable homeowners.
“With large equity stakes, they are big-time targets, especially considering their potential for cognitive impairment,” said David Neil Kirkman, a former special deputy attorney general in North Carolina who spent 20 years prosecuting elder fraud and is the author of the 2020 book Elder Fraud Wars.
The scope of the crimes is largely unknown, since much of the enforcement and prosecution of the crimes occurs at the state, county and local levels, Kirkman said.
In its 2020 Elder Fraud Report, the FBI said fraud losses reported to the bureau by victims age 60 and older were nearly $1 billion. The losses arose in crimes that ran the gamut from extortion to tech-support scams. However, Kirkman, based on his experience as a county prosecutor and research cited in his book, believes such estimates could be off by a factor of 40, because so few of the crimes are reported to law enforcement.
The Consumer Financial Protection Bureau (CFPB), a federal agency set up to safeguard against financial abuse, recently warned that millions of struggling homeowners should be wary of mortgage loan modification scams, set up to take consumer’s money on the false promise of preventing a foreclosure.
“Mortgage loan modification scams are schemes to take your money — often by making a false promise of saving you from foreclosure,” CFPB officials say. “These so-called foreclosure or mortgage consultants often use public notices or lists of distressed borrowers purchased from private companies to find their targets.”
The CFPB received 10,789 complaints in recent years about mortgage abuse, including modifications and collection or foreclosure, according to the bureau’s consumer complaint database. It does not break out the ages of those making reports.
The FBI’s elder fraud report says victims age 60 and older suffered $50 million in real estate and rental fraud losses in 2020. Complaints about real estate and rental fraud were up 22 percent that year from two years earlier, according to the report.
The scams typically ask for upfront fees, make promises to get modifications, urge homeowners to sign over their property titles and ask for signatures on complex documents that are not easily understood, according to CFPB officials.
Scam artists exploit a dozen vulnerabilities that may vex older Americans: cognitive decline, isolation or loneliness and a mix of decision-makers in families, Kirkman said. Quick pitches from scripts come “a mile a second” that are hard to follow over the phone, he added. And as a group, boomers hold 20 times more assets than millennials and twice as much as Gen Xers, he said.
The Federal Trade Commission (FTC) warns that scammers come equipped with all kinds of assurances of who they purportedly are: housing counselors, lawyers or government officials. They will say they’ll handle all the details of your mortgage and urge you not to contact your lender. Sometimes, they tell victims to send mortgage payments directly to them.
The mortgage and rent relief packages passed by Congress early during the COVID-19 pandemic provided six to 12 months of mortgage forbearance. As those deals expire or when the program is phased out, the vulnerability of older Americans could increase further and with it, inevitable fraud.
Be a savvy consumer
If you get a cold call offering to restructure your mortgage, you should consider seeking help before you move forward. The CFPB, FTC and FBI offer these tips:
- Under a federal regulation known as the Mortgage Assistance Relief Services rule, it is illegal for a company to charge you a penny until it’s given you a written offer for a loan modification or other relief from your lender, and you accept it.
- The U.S. Department of Housing and Urban Development (HUD) offers a list of approved housing counseling agencies who can discuss legal options to help you pay your mortgage or obtain a legitimate reverse mortgage.
- Resist pressure to act quickly. Scammers try to create a sense of urgency.
- Search online for contact information, such as names, emails, phone numbers and addresses related to the proposed offer. Legitimate organizations are more likely to be transparent.
- Never send money or give personally identifying information to people or businesses you have not verified are legit.
- You can contact your state attorney general’s office for more information about state protections and, if necessary, file a complaint. Prosecutors in some large counties have white-collar fraud units that might also provide help in sorting through mortgage restructuring offers that come out of the blue.
- If you think you are a victim of a mortgage loan modification scam, consider getting an attorney by contacting your local bar association.
- And, as always, shut down your computer or other electronic devices if you get a popup message or a locked screen, which may indicate a virus is downloading.
Ralph Vartabedian was a writer and editor at the Los Angeles Times for 38 years. He also has written for the New York Times and other outlets, was a finalist for the Pulitzer Prize and twice won the Gerald Loeb Award for Distinguished Business and Financial Journalism.