Foreclosure Rescue Scams

BOSTON- The coast to coast real estate boom has spawned a nasty dark side in the form of an extremely widespread and damaging consumer scam. Foreclosue "rescue" scams find their opening at the intersection of surging home values and the new financial stresses many families face, says NCLC's new report "Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity Stripping Foreclosure Rescue Scams."

The large run-up of real estate values in recent years has left many homeowners, often unwittingly, sitting atop five and six figure chunks of home equity. But the growth of this pile of wealth -- an an unprecedented variety of ways to tap into it -- has conincided with remendous financial pressures on a wide swath of American families. Rising costs for housing, health care, and education plus increasing job insecurity, income volatility and downward pressure on real incomes have fueled a dramatic surge in bankruptcy filings and other financial distress.

"This is a uniquely bad collision of the financial stresses on homeowners with a boatload of bad ways for them to be conned into losing their homes or the equity in them," says NCLC's Steve Tripoli, principal author of the report.

"The scam artists pick up notices of default mortgage off the public record and then aggressively market themselves to desperate homeowners as their saviors," Tripoli says. "But the reality is all too often different. They are double dealers who are really after the built up equity in the house or even, in a quite a few cases, the house itself. They take homes outright through trickery or by saying they will give homeowners a reasonable chance to buy them back, but they usually structure those deals so that recovery's all but impossible. They just don't seem to care how many wrecked lives they leave behind = this can knock a family right out of the middle class or torpedo a low-income family's dreams of getting there."

Case studies abound. There is the California firm with at least 1800 clients in that state alone and operations in several other states was recently brought to heel by California's Attorney General. Minnesota's AG has put major scammers out of business and is pursuing others, a high profile action in Colorado drove another scam artist out - only to see him resurface, still in business, in Texas -- and there have been major outbursts of these scams in the D.C. Maryland, Virginia region, Florida, New York, Ohio and many other States. It's important to note that most of these scams go either completely unexposed or unpunished.

Jay Jump of the Jump Law Group has noted an alarming increase in the number of foreclosures in the Washington State area and the number of Washington State residents who have been taken advantage of by these con-artists. There is currenly no pending legislation or state regulation stopping these 'rescuers' from preying on innocent consumers and homeowners in Washington although a task force in the King County Prosecutors Office has been appointed.

Laws attempting to rein in these scams have passed in several states, but, too often, met with limited success. "Individual homeowners face difficulties finding attorneys or paying for the time it takes to track down the perpetrators," says report co-author Elizabeth Renuart. "And many States lack the resources or legal firepower to put the scammers out of business." State laws need strengthening in a variety of ways."