MINNEAPOLIS - Nearly half the victims of mortgage loan modification scams are of African-American, Hispanic, or Asian descent, according to statistics released today by the Homeownership Preservation Foundation (HPF), an independent national nonprofit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure since 2004. Nearly one-in-four of the possibly fraudulent scams reported were in California.
Since February of last year, HPF has operated a specialty unit of their Homeowner's HOPE Hotline (888-995-HOPE), a resource for financially distressed homeowners. The unit focuses on those who believe they have been victimized by a scam or have been approached by someone offering related services they suspect are fraudulent. Virtually half of the calls fielded since the hotline was launched were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian.
"Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams," said Colleen Hernandez, HPF's CEO.
California far and away has the highest incident of reported possibly fraudulent activity, accounting for 22 percent of the calls. Florida was the second highest with 7 percent, followed by Texas with 5 percent, New York with 5 percent, and Georgia with 4 percent.
Miami ranked highest among cities for reported scams, followed by Los Angeles, Las Vegas, Houston, and Chicago. Interestingly, while California's reported fraudulent activity was significantly higher than other states, only one city from the Golden State ranked in the top five, indicating that purported scam activity isn't concentrated in any one area.
The Federal Trade Commission in February issued a rule prohibiting the payment of any upfront fees to negotiate mortgage reduction payments on behalf of a homeowner. Nevertheless, an untold number of companies and individuals continue to openly and flagrantly violate the rule, asking on average for an upfront fee of $2,589.58 to modify a mortgage. In virtually all instances, either no mortgage reduction was achieved or no work was actually performed.
"It is alarming that an FTC rule intended to curtail mortgage scams is having a limited impact," Ms. Hernandez said. Further complicating the situation, Ms. Hernandez noted that the FY 2011 budget recently enacted completely removes federal funding for housing counseling, originally funded at $88 million. This development will invariably lead to a dramatic surge in mortgage scams as counseling has proven to be a major deterrent to foreclosure rescue scams.
"Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners," Ms. Hernandez said. "Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered."
Ms. Hernandez says that companies demanding upfront fees to renegotiate mortgages are often run by individuals who were responsible for facilitating highly dubious mortgage loans during the housing bubble. "They profited on the front end and now they are seeking to cash in on the back end," she said.
Foreclosure rescue scam artists always demand fees from distressed homeowners upfront, even if it requires withholding mortgage payments to mortgage servicers.
Ms. Hernandez cited a comment by Illinois Attorney General Lisa Madigan, who said at a recent seminar on foreclosure rescue scams, "I have yet to come across a legitimate loan modification organization that charges upfront fees for their services."
About the Homeownership Preservation Foundation
The Homeownership Preservation Foundation (HPF) is an independent national nonprofit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure. HPF guides consumers onto the path of sustainable homeownership and develops innovative solutions to preserve and expand homeownership.Through its Homeowner's HOPE Hotline, 888-995-HOPE , HPF provides comprehensive financial education and confidential foreclosure prevention counseling for FREE, 24 hours a day, 7 days a week, 365 days a year, in over 170 languages. Since 2007, HPF has served more than four million distressed homeowners, an average of 5,500 each weekday, who depend upon HPF as a trusted, neutral source of information and assistance. For more information about the Homeownership Preservation Foundation or the Homeowner's HOPE Hotline, please visit www.995hope.org