Good news in foreclosure rescue scam reports tracking to double in 2012

by Broderick Perkins

(10/26/2012) - Struggling mortgage borrowers must continue to remain vigilant, protecting themselves from foreclosure rescue scams that target them with bogus mortgage assistance.

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) says foreclosure rescue fraud reports in the first half of 2012 are so high they already nearly equal reports from all of 2011.

There is, however, some good news from the report. Greater foreclosure rescue fraud awareness may be generating more reports and snaring more criminals.

The expanding foreclosure rescue market is an illegal black market of scammers who prey on vulnerable homeowners facing foreclosure. The operations often ask homeowners to transfer their home's title or make payments to the "rescuer" who promises to interrupt or end the foreclosure process.

Instead of protecting their home from foreclosure, the borrower is more likely to lose thousands of dollars at a time when he or she can least afford it and face a heightened risk of losing the home.

Nationwide, financial institutions filed 2,360 foreclosure rescue related suspicious activity reports (SARs) in the first half of 2012. At that rate, the numbers of these scams in 2012 will could double the 2,782 foreclosure rescue related SARs reported in 2011, FinCEN reported.

Consumer advocates advise the instant you feel you can't make a mortgage payment seek help from a U.S. Department of Housing and Urban Development certified counselor or agency as a pre-requisite to immediately following up with a call to your lender. The counselor will help you prepare for your talk with your lender.

HUD also says HOPENOW at 888-995-4673 offers free, around-the-clock comprehensive foreclosure assistance.

You should have that information handy, even if you aren't struggling with your mortgage. That's particularly true if you live in California.

Why fraud awareness is key

FinCEN said foreclosure rescue SARs were disproportionately concentrated in California, where the state's attorney general has created a Mortgage Fraud Strike Force and championed California's Homeowner Bill of Rights, which codifies for state law the National Mortgage Settlement.

Those efforts have helped raise awareness and FinCEN says the booming trend in foreclosure rescue SARs this year could be related to a heightened level of awareness.

A FinCEN advisory earlier this year encouraged SAR filers to use the phrase "foreclosure rescue scam" when reporting any SAR (which can include mortgage loan fraud or MLF SAR, fraud that occurs on the origination side), which helps more readily isolate SARs by category.

Awareness also has been boosted by major federal investigations, enforcement actions, reports, bulletins, and other public outreach efforts to prevent foreclosure rescue fraud.

However, FinCEN also reports continued stress on the housing market (underwater mortgages, lower turnover of existing homes, and less new home construction) may be contributing to criminals developing new schemes related to existing mortgages in distress, as opposed to schemes related to new loan origination.

MLF SARs dropped 41 percent in the second quarter this year, compared to the same period last year. That's largely due to the overhaul of mortgage origination regulations from a host of federal agencies.

FinCEN recently closed a regulatory gap by requiring non-bank residential mortgage lenders and originators to establish anti-money laundering programs and file SARs, just as other financial institutions do.