Foreclosure Rescue Scam Reports Increase, Nature Of Scams Is Changing

The Financial Crimes Enforcement Network (“FinCEN”) today released its first analysis of suspicious activity reports (“SARs”) containing information about potential foreclosure rescue scams. The report involved an analysis of more than 3,500 SARs filed from 2004 through 2009, of which the great majority, 3,000, were filed last year. 

In addition to the increase in reported activity, FinCEN says the nature of foreclosure rescue scams had shifted during the period it examined in the study. Early SARs containing information about loan modification/foreclosure rescue scams identified subjects purporting to be loan modification or foreclosure rescue specialists. These subjects targeted financially troubled homeowners with promises of assistance. The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.
 
The scams described in later SARs, according to FinCEN, reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.
 
FinCEN also ranked the top 10 metropolitan regions by the concentration of local subjects of all mortgage loan fraud SARs reported between January 1, 2009 and June 10, 2010, as follows: