by Diane Johnson, HUD Newark Field Officer
The housing crisis in America has done more than increase the number of vacant properties. It triggered a spike in mortgage modification scams. In fact, mortgage modification scams made the Better Business Bureau’s list of “Top 10 Scams of 2011”. In these scams, con artists and thieves target distressed homeowners who are looking for resources to save their homes.
As U.S. Department of Housing and Urban Development (HUD) Newark Office Director, I have watched the housing market rise and fall, carrying the dreams of many Americans along the way. To afford that American dream—a house and yard in a safe, quiet neighborhood—many borrowers were enticed by zero-down mortgages and no interest rate loan programs, while some were faced with impending foreclosure or were looking to lower their monthly mortgage payment by refinancing to take advantage of lower interest rates.
Now many of those homeowners are at risk of being scammed by people posing as “loan modification specialists.” I’ve heard countless stories of homeowners being scammed. Corrupt individuals who work in the mortgage or housing industry approach homeowners who are upside down in mortgages or bogged down in high interest rates. Their tactics include giving the false impression that they are affiliated with government programs, charging illegal up-front fees, and executing fraudulent lease-back, financing, and repurchase schemes.
While anyone can fall prey to these scams, studies show that mortgage fraud artists disproportionately target African-Americans, older Americans, and Hispanic borrowers. Hispanics and African Americans are also among the two groups of homeowners who were most victimized by zero-down mortgages on moderately priced homes—and thus most vulnerable to associated fraud. In Union County, the rate of scams reported is 28% for African Americans, 35% for Latino Americans, 22% for White Americans, and 15% for people who chose not to share their race or ethnicity. Older Americans tend to be most susceptible to reverse-mortgage scams because they have built up a “nest egg” of equity in their homes.
New Jersey is the 5th raking state for scam complaints, with over 800 complaints reported to the 1-888-995-HOPE Hotline (Housing Preservation Foundation). Through March 1st, 2012, scammed New Jersey homeowners have reported losses totaling $1,771,780 to the Loan Modification Scam Prevention Network, with $143,812 reported by Union County residents alone.
The scams are so rampant that HUD and HUD-approved agencies are making a concerted effort to warn people about mortgage modifications scams. We are the trusted resource homeowners should turn to whenever they are looking to restructure their payments so they can afford to stay in their homes.
Struggling homeowners are lured to scammers when they see or hear commercials on television or radio that promise to save them from losing their homes to foreclosure. Scammers also send mail directly to the homeowners stating, “Payment Relief Notice” or “We Can Save Your Home.” My advice is to stick with the old cliché: If it sounds too good to be true, then it probably is.
Secondly, I advise people not to panic. There are HUD-approved counselors who can help homeowners for free. The government doesn’t want to see homeowners end up in far worse situation than they were in before, which is why HUD and HUD-approved housing agencies like (insert organization here) are here to provide assistance to homeowners that need help navigating through reverse mortgages, refinancing and assisting with mortgage questions.
People who are not facing foreclosure often ask me, “Why should I care?” For every house that goes into foreclosure, you are that much closer to your own home being under water, meaning that the value of your home will be less than what you bought it for. Also, you may not personally be facing a foreclosure, but chances are that someone in your family, community, or workplace may be. The more you know about the people on the ground that are there to help all homeowners, the better armed we all are against these scammers. HUD-approved counselors are available in your neighborhood, to help you stay in your home and find solutions that keep communities intact.
There is trusted help out there—locally and nationally. HUD has approved agencies to help and protect tens of thousands of borrowers across the country that are at risk of losing their homes. Get the facts at www.hud.gov/preventloanscams or report suspected scammers by calling 1-888-995-HOPE (4673).
We all must be vigilant. Know the signs of mortgage relief scams avoid being scammed by seeking out HUD-approved agencies to obtain help, protect your community and prevent future scams by reporting suspicious activity.