According to a release from the Federal Bureau of Investigation (FBI), more than 4,000 financially-strapped homeowners recently lost at least $7 million to a California business that allegedly operated a loan-modification scam. Last month, 11 representatives of that company were federally indicted, but by that time, many of the victims had already lost their homes.
Closer to home, Anthony J. DeMarco, III, of Conshohocken, Eric Bascove, of Blue Bell, and two other men pleaded guilty earlier this year to defrauding homeowners in foreclosure out of millions of dollars in a "foreclosure rescue company" the men operated in the Philadelphia area called DeMarco REI, Inc.
Today, to help protect distressed homeowners around the country from a rising tide of fraud schemes — and to raise awareness about them — the FBI joined the Department of Justice, the Department of Housing and Urban Development, and the Federal Trade Commission (FTC) in announcing the results of the Distressed Homeowner Initiative. This initiative was launched by the Bureau —co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group — in October 2011.
The initiative combines the resources of federal, state and local law enforcement agencies and the efforts of regulatory agencies to target perpetrators both criminally and civilly. Over 200 companies have been shut down, and criminal charges were filed against 530 defendants. These cases involved losses of more than $1 billion from more than 73,000 victims across the country.
"In contrast with previous initiatives, where the fraud victims primarily were lenders, the focus here is on individual homeowners, many times at their most vulnerable point,” said Associate Deputy Director Kevin Perkins in the release.
Based on intelligence from multiple sources, schemes targeting distressed homeowners have emerged throughout the country, and while the majority of FBI mortgage fraud cases involve loan origination fraud, the bureau had a 300% increase over the past three years in cases involving distressed homeowner fraud.
With current mortgage data showing that 22.3% of residential properties with mortgages are “underwater” — when borrowers owe more than their homes are worth — the FBI believes that fraudsters will continue to target distressed homeowners.
A disturbing trend among these cases involves an increasing number of lawyers playing primary or secondary roles in the fraud. In 2010, the FTC issued a rule that prohibited companies that offer loan modification or other types of mortgage assistance services from asking for fees in advance (some states have similar regulations), but with an exemption in some instances for lawyers performing legal work. Criminals targeting distressed homeowners try to circumvent the rules by using attorneys — which by itself adds an air of legitimacy to their fraudulent schemes — and calling their upfront fees “legal retainers.”
The FBI’s Financial Intelligence Center analyzed thousands of consumer complaints referred by partners at the FTC, which helped identify where high-priority offenders were operating. The analysis of information from partner agencies and from the FBI's own investigations will continue to be a vital part of the efforts to protect homeowners. The FBI said it also remains committed to targeting the most egregious criminal offenders with sophisticated investigative techniques like undercover operations and court-authorized electronic surveillance ,and through joint efforts with law enforcement and regulatory partners.
Conshohocken Man Pleads Guilty to $30 Million Mortgage Fraud Scheme
Foreclosure Rescue Scammers Sentenced to Prison