MBA's Story Testifies on Foreclosure Rescue Fraud

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(News Source: Mortgage Bankers Association)

(WASHINGTON, D.C.) -- Robert E. Story, Jr., CMB, Chairman-Elect of the Mortgage Bankers Association (MBA), today testified before the House Financial Services Subcommittee on Housing and Community Opportunity at a hearing on "Legislative Solutions for Preventing Loan Modification and Foreclosure Rescue Fraud."
 
Below is Mr. Story's oral testimony, as prepared for delivery.
 
"I am here today because MBA shares your concerns about the rapid rise in these scams. There is no doubt we need to better protect innocent homeowners. Those committing fraud prey on people at the end of their financial rope. Their scams start with a phone call, a mailing, or an advertisement promising help. These scammers are difficult to distinguish from organizations offering real help. They even use similar names. They are all designed to achieve one thing and one thing only: to lure a person who is desperate for help.
 
"When a fraudster makes contact, the borrower is told that their situation is dire, and that they are going to lose their home. The scammer does everything possible to raise the anxiety level of the borrower. When the borrower is at their lowest point, the scammer says there may be a solution. But the "solution" comes with a price - the borrower must agree to cooperate. And the borrower is told to cease any communication with their lender to avoid being detected.
 
"These scams take many forms. Scammers promise to complete paperwork and obtain a loan workout in exchange for fees that can escalate into thousands of dollars. Then, the scammers either don't follow through or perform menial tasks that a servicer or HUD-approved counselor could complete for free.
 
"Scammers convince homeowners that they can save their homes from foreclosure through deed transfers and promises to lease or sell back the property - which never happens. In extreme instances, scammers sell the home or secure a second loan without the homeowners' knowledge, stripping the property's equity for personal gain.
 
"So what can be done to stop these cruel practices?  First and foremost, borrowers need to turn to the right sources for help.
 
"MBA encourages borrowers in financial trouble to call their mortgage servicer right away. Mortgage servicers want to avoid foreclosure. They have an economic incentive to do so. Servicers have the legal authority to create repayment plans, refinance, or modify a mortgage.
 
"Borrowers should contact trustworthy sources for advice and counseling.  The HOPE hotline at 1-888-995-HOPE or a HUD-approved counselor are trustworthy resources. State and local governments across the country have also set up hotlines.
 
"Raising consumer awareness of scams is a vital function of government and industry efforts.  The Treasury Department and banking regulators have issued alerts for consumers. And the FTC has produced a fact sheet warning consumers about services that promise to stop the foreclosure process.
 
"We also need to redouble our efforts to go after those who prey upon vulnerable homeowners.
 
"The legal tools needed to investigate and prosecute fraud are already in place. The federal mail and wire fraud laws reach all possible varieties of foreclosure rescue fraud.
 
"What's missing are the resources.  MBA has asked Congress to appropriate additional funding for the FBI to investigate and prosecute fraud. The funding would pay for new FBI field investigators. It would also allow the Justice Department to hire additional prosecutors focused on this area. The funding would also support the operations of the FBI Interagency Task Forces in the 15 areas with the worst problems.
 
"MBA is particularly pleased that today, the House is taking up S. 386, the Fraud Enforcement and Recovery Act. This bill includes $245 million for law enforcement to crack down on financial fraud, including foreclosure rescue fraud.
 
"On behalf of MBA, I would like to thank the subcommittee for the opportunity to testify today.  Foreclosure rescue fraud is a growing problem that is becoming more expensive for homeowners and lenders.  MBA believes that increased enforcement, better communication, and further innovation is required to adequately protect borrowers from the costs of foreclosure rescue fraud."

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