Emerging Fraud Schemes

October 11, 2012

Emerging fraud schemes are hitting home for tens of thousands of people living in every state in the country.

Audio Transcript

Mollie Halpern: Emerging fraud schemes are hitting home for tens of thousands of people living in every state in the country.

I’m Mollie Halpern of the Bureau, and you’re listening to Inside the FBI.

Currently, more than 20 percent of all mortgage fraud cases involve distressed homeowner fraud. Just two years ago, that number was less than 4 percent.

Craig Howland: Recently I’ve seen cases involving families who are out on the streets. Families who, but for these scammers, might still be in their homes. You watch these scammers who just do not care. When you see situations like that, as a representative of the FBI, obviously we want to bring those people to justice.

Halpern: Coming up…the schemes targeting struggling homeowners; how to prevent falling prey to fraudsters; and where to get real help. But first, a look at the growing crime problem and how the FBI is countering it…

The FBI launched the Distressed Homeowner Initiative one year ago this month. It’s the first-ever nationwide effort to eradicate mortgage fraud and related offenses. The FBI has joined forces with our law enforcement and regulatory partners such as the U.S. Department of Housing and Urban Development and the Federal Trade Commission. Together, we are shutting down these companies and prosecuting those running them. To do that, multiple investigative techniques are being used—everything from undercover operations to consensually recorded conversations to confidential human source information.

Craig Howland, the unit chief of the Financial Institution Fraud Unit, says this multi-agency initiative serves as a force-multiplier in addressing mortgage fraud.

Howland: We want to work with our other partners on the federal and state side to make sure that nothing falls through the cracks.

Halpern: The FBI also put together a multi-agency Distressed Homeowner Strike Force in Los Angeles back in May of 2012. There are victims in every state, but our intelligence has identified the greater Los Angeles area, including the counties of Orange, Los Angeles, and Riverside, as an epicenter of the most distressed homeowner fraud.

Overall, 21 Mortgage Fraud Task Forces are strategically placed in areas across the nation identified with a high threat for mortgage fraud. More than 265 special agents Bureau-wide are assigned to investigate mortgage fraud. There are 62 Mortgage Fraud Working Groups in which members learn emerging trends and provide successful techniques to combating criminal matters.

Our proactive efforts to counter mortgage fraud are ongoing—as of the end of June 2012, more than 2,300 of these cases are pending.

Schemes targeting distressed homeowners began emerging two years ago when financial institutions began to tighten their lending practices. At that time, fraudsters were targeting financial institutions. Nowadays, they’re prey on individuals, and their schemes have adapted to reflect their new focus. Section Chief Timothy Gallagher of the Financial Crime Section…

Tim Gallagher: Fraudsters will go to where the money is. Because of that, they are targeting individuals—not lending institutions, but individuals—and going after their last dollar; going after whatever equity they may have in their house. The last $1,000 that they have in their bank account, they will take that from them.

Halpern: These fraudsters understand the mortgage process and are doing their homework to target their victims. They research public databases, for example, to find homeowners who have gone into default with their lenders and who have received notices that they’re in pre-foreclosure. The scammers’ knowledge gives them power to further their schemes over homeowners who are desperate to do whatever it takes to save their homes.

Gallagher: Individuals who are in a position where they are losing their houses, their judgment may be somewhat clouded and may fall prey to one of these schemes.

Halpern: Scammers contact distressed homeowners through the mail, on the phone, over the Internet, or they’ll distribute fliers in certain areas. That’s when the con artists make their empty promises…

Howland: The most egregious companies will promise you that they will modify your loan. So if you’re in default, if you haven’t made a payment for a year or two, they’re going to tell you, “Hey look, we’re going to rewrite your loan for you so you’re not in default anymore, and the foreclosure is going to stop.” And then they’ll say something outlandish like, “We have a 98 percent success rate,” or, “We have a pre-written approval through one kind of a lender or another that we’re going to get you a new loan.”

Halpern: Companies and their employees make themselves look legitimate by making up success stories, claiming they’re affiliated with federal government programs and with attorneys who will represent homeowners—so they can solicit up-front fees.

Howland: They are nothing but sales. They want to tell you what it takes to get you to send them the money. The attorneys very, very rarely, if ever, see client’s files. And really are in no way representing these people in any way. They don’t care if they take your money and they don’t care if they take your home. You are left with nothing.

Gallagher: Don’t pay upfront fees to anyone who claims that they can modify your loan. They claim that they are going to modify your loan and that they have a relationship with the bank, but they don’t. Do not make mortgage payments to anyone other than the financial institution that holds your mortgage. That money is not going to the lender, and your house will still end up in foreclosure.

Halpern: Agents say scammers have done their homework—and homeowners should do the same.

Howland: They have to contact the Better Business Bureau. Find out if these companies have complaints because, if they do, it should be a red flag that maybe you ought not be spending your money.

Halpern: There are legitimate agencies which will help homeowners.

Gallagher: Assistance is available through the Federal Home Affordable Modification Program, or HAMP, which is offered by the Department of Housing and Urban Development. Reach out for them, they can assist you in modifying your mortgage.

Halpern: Applying to the HAMP program is free—so is the help homeowners can receive from a HUD-approved housing counselor. A third party cannot guarantee or pre-approve HAMP mortgage modification applications. Homeowners should not pay a third party to assist them in that application process because it does not improve their likelihood of receiving a mortgage modification.

For information on how to apply to HAMP, call the Homeowner’s HOPE Hotline at 1-888-995-4673, or visit www.MakingHomeAffordable.gov.

If you suspect homeowner fraud, dial 1-800-CALL FBI (225-5324), visit our website at www.fbi.gov or contact your local FBI office.

You can also report fraud to the Housing and Urban Development Office of the Inspector General and the Federal Trade Commission.

Mortgage fraud will continue to remain a priority within the FBI. It’s one way to help ensure the integrity of the housing market and to keep our communities safe.

I’m Mollie Halpern of the Bureau, and this has been Inside the FBI

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