Los Angeles Personal Injury Lawyer - FBI

Salon: Why Loan Modification Scams are Booming

Paul Kiesel — Thu, 24 Sep 2009 18:28:42 GMT

FYI: Here's a link to a blog I wrote a year ago that portends what's being described in the article below.

During the go-go years of the real estate bubble, shady mortgage brokers thrived, thanks to the sluggish response of regulators and law enforcement agencies. Amid the ruins of the crash, there's a new boom attracting unscrupulous mortgage professionals: "Foreclosure rescue" companies promising -- in exchange for a large upfront fee -- to persuade lenders to modify desperate homeowners' mortgages. And authorities are again finding themselves ill-equipped to deal with the deluge.

In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise.

"This is a very big scam," says California Attorney General Jerry Brown. "They're all over the place, and as soon as you get one, they migrate to somewhere else."

The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities' moves against the companies often are.

Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.

Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.

Homeowners do not have to pay a company to negotiate on their behalf: They can always contact their mortgage servicer directly for a loan modification, at no cost. But consumers often find the process frustrating. For those who want guidance, nonprofit housing counselors approved by the Department of Housing and Urban Development will help for free.

Consumers should especially be wary of companies charging upfront fees or touting guarantees. The Illinois attorney general says that her office has yet to see any such company operate within the boundaries of state law.

Click here for the rest of the article.

Originally posted at InjuryBoard by Paul Kiesel

Lucrative Fees More Attractive to Loan Servicers than Modifications

Paul Kiesel — Tue, 04 Aug 2009 16:21:32 GMT

From The New York Times:

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

For the rest of this article, click here.

For another article on Loan Modification Scams, click here.

Originally posted at InjuryBoard by Paul Kiesel

Reuters: Microsoft Warns of Financial Crisis E-mail Scams

Paul Kiesel — Wed, 29 Oct 2008 15:58:47 GMT

Loan modification scams are becoming more prevalent as most of the nation, along with nefarious scam artists, is aware of the $700 billion financial bailout that was passed weeks ago. Congress and other consumer advocate organizations have also been urging lenders, as part of the recommendations of the bailout package, to modify loans in order to protect themselves against further financial damage and to abate the strength of the foreclosure crisis.

Also, check out my blog from yesterday which discusses other loan modification scams that aren't as sophisticated as e-mail scams, however, they can be implemented just as effectively.

From UK Reuters: LONDON, Oct 29 (Reuters) - Internet fraudsters will try to exploit the global financial crisis by sending fraudulent emails purporting to offer cash-strapped consumers new mortgages, loans or money from failed banks, a Microsoft executive said on Wednesday.

Tim Cranton, an Internet safety expert at Microsoft, said there are early signs that criminals have already begun trying to cash in on the economic turmoil.

"It's especially troubling right now with the financial crisis," he told Reuters in a telephone interview. "There are more and more people who are maybe in a more desperate or vulnerable situation.

"We have seen an increase in some mortgage refinance type of scams. We are anticipating that they'll become more sophisticated.

"We have seen that with Hurricane Katrina, the (2004 Asian) tsunami and other natural disasters where the scammers immediately jump."

Fraudsters may send spam emails to consumers that ask them to pay a fee related to the collapse of a bank or financial institution, he added.

"They will allege it is associated with the refinancing -- so because of this bailout you'll get a much better deal on your mortgage and all you have to do is pay this fee."

Online criminals have long used promises of easy money to try to defraud unsuspecting victims.

Common scams include requests to help move money out of a developing country. People are offered a cut of the fortune if they first pay a release fee.

Or they are told they have won a lottery in a foreign country and will receive a huge jackpot once they pay an administration fee.

A poll for Microsoft on Wednesday found more than a quarter of computer users thought it was likely they would fall victim to an online scam that would cost them money.

Half said the scams made them more wary of shopping online, while more than a third said it led to them being more reluctant to use the Internet at all.

However, the poll suggested that the actual chances of becoming a victim are far lower than the perceived risk.

Of 5,000 people polled across Europe, only 113 had lost money to an Internet fraudster in the last year. That equates to one in 44 of those questioned.

Microsoft said it has formed a coalition with Yahoo!, Western Union and the African Development Bank to help spread the message about hoax emails.

"What we'd like to do is raise awareness so that people feel more confident about using the Internet," Cranton said. "We don't want to see a reduction in e-commerce."

Originally posted at InjuryBoard by Paul Kiesel

FBI: Beware of Loan Modification Scams

Paul Kiesel — Tue, 28 Oct 2008 16:08:26 GMT

According to the Justice Department, San Joaquin Valley has been a hotbed for loan modification scams, as cities like Stockton, Modesto and Merced top the foreclosure rankings among cities nationwide.

Last week, Representative Dennis Cardoza (D-Modesto), urged Attorney General Michael Mukasey to investigate mortgage-reduction schemes that are being marketed to distressed homeowners throughout the Valley.

Most of these scams ask homeowners for an upfront fee in order to start a loan modification program. At best, the homeowners may end up paying for work that is completed by the group asking for the money, however, it's work that likely could have been done for free through other non-profit organizations or loan-modification assistance programs (i.e. Community Housing Council, a non-profit based in Fresno). At worst, the homeowners pay for work that isn't done at all.

Cardoza wrote to Mukasey that it was "imperative" that law enforcement authorities "crack down on these foreclosure scams quickly and comprehensively. Cardoza pointed out that San Joaquin Valley residents are particularly vulnerable because of the region's foreclosure crisis.

The scams are typically initiated over the phone or through the mail, however, the people running the scams sometimes show up at the homes they're targeting. The companies will then offer the distressed homeowner their services to renegotiate the mortgage in exchange for an up-front fee amounting to one month's mortgage payment or more.

Just last week, in Modesto, "some homeowners attended a workshop in which they were asked to pay $3,500 for getting their mortgage woes resolved," (San Jose Mercury News, 10/27/08).

The FBI is aware of this problem, as they report to having 1,569 pending mortgage fraud investigations open as of last month. However, it is clear that number will rise and more resources will need to be poured into combating mortgage fraud, as incidences of it has annually doubled between 2003 and 2007.

The FBI has also been taking some flack recently due to their late arrival to all of the rampant mortgage fraud that's been taking place over the last couple years, but part of that is due to the agency not having enough agents to cover the continuing spread of mortgage fraud, as the housing and foreclosure crisis gets worse. The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

Originally posted at InjuryBoard by Paul Kiesel

NYT: FBI Joins the Mortgage Fraud Game Late and Now Doesn't Have Enough Players

Paul Kiesel — Tue, 21 Oct 2008 18:40:53 GMT

Here's an interesting New York Times article describing the problems the FBI has been having in handling mortgage fraud cases.

The FBI increased its efforts and resources over the spring to investigate cases of mortgage fraud, just before IndyMac failed and Fannie Mae and Freddie Mac needed to be bailed out, however, it appears that their pool of agents has been depleted (due to National Security risks/cases) and they're going to be moving forward with a greater caseload and limited task force.

From the New York Times:

The Federal Bureau of Investigation is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, The New York Times’s Eric Lichtblau, David Johnston and Ron Nixon reported, citing current and former bureau officials.

The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

The pressure on the F.B.I. has recently increased with the disclosure of criminal investigations into some of the largest players in the financial collapse, including Fannie Mae and Freddie Mac. The F.B.I. is planning to double the number of agents working financial crimes by reassigning several hundred agents amid a mood of national alarm. But some people inside and out of the Justice Department wonder where the agents will come from and whether they will be enough.

So depleted are the ranks of the F.B.I.’s white-collar investigators that executives in the private sector say they have had difficulty attracting the bureau’s attention in cases involving possible frauds of millions of dollars.

Since 2004, F.B.I. officials have warned that mortgage fraud posed a looming threat, and the bureau has repeatedly asked the Bush administration for more money to replenish the ranks of agents handling nonterrorism investigations, according to records and interviews. But each year, the requests have been denied, with no new agents approved for financial crimes, as policy makers focused on counterterrorism.

According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.

Over all, the number of criminal cases that the F.B.I. has brought to federal prosecutors — including a wide range of crimes like drug trafficking and violent crime — dropped 26 percent in the last seven years, going from 11,029 cases to 8,187, Justice Department data showed.

“Clearly, we have felt the effects of moving resources from criminal investigations to national security,” John Miller, an assistant director at the F.B.I, told the newspaper. “In white-collar crime, while we initiated fewer cases over all, we targeted the areas where we could have the biggest impact. We focused on multimillion-dollar corporate fraud, where we could make arrests but also recover money for the fraud victims.”

But Justice Department data, which include cases from other agencies, like the Secret Service and Postal Service, illustrate the impact. Prosecutions of frauds against financial institutions dropped 48 percent from 2000 to 2007, insurance fraud cases plummeted 75 percent, and securities fraud cases dropped 17 percent.

Statistics from a research group at Syracuse University, the Transactional Records Access Clearinghouse, using somewhat different methodology and looking only at the F.B.I., show an even steeper decline of nearly 50 percent in overall white-collar crime prosecutions in the same period.

In addition to the investigations into Fannie Mae and Freddie Mac, the F.B.I. is carrying out investigations of American International Group and Lehman Brothers, and it has opened more than 1,500 other mortgage-related investigations. Some F.B.I. officials worry privately that the trillion-dollar federal bailout of the financial industry may itself become a problem because it contains inadequate controls to deter fraud.

No one has suggested that a quicker response would have averted the mortgage meltdown, but some officials said a faster reaction might have deterred more of the early schemes that seized on loose federal lending regulations.

“They were very late to the game,” Representative Zoe Lofgren, a California Democrat who has quarreled with the F.B.I. over its financing priorities, told The Times of the bureau’s response to the mortgage crisis. “They were not on top of this, and they’re just now starting to really do something.”

Republicans and Democrats in Congress are pushing for a more aggressive response by the F.B.I. Representatives Mark S. Kirk, an Illinois Republican who sits on the House appropriations committee, and Chris P. Carney, a Pennsylvania Democrat, called on Congress to triple the F.B.I.’s financing for financial crimes investigations.

“To fix our system and prevent a repeat of the events we now see,” they wrote in a letter this month to Robert S. Mueller III, the F.B.I. director, “we have got to set an example by bringing the full might of federal law enforcement against the people who illegally profited or destroyed companies at the expense of our country.”

In public, Mr. Mueller has said that the bureau is doing more with less, when it comes to criminal prosecutions. And Justice Department officials have repeatedly asserted the administration’s commitment to fight violent and white-collar crime even as they have not provided the bureau additional resources.

But current and former officials say Mr. Mueller has lost a behind-the-scenes battle with the Justice Department and the Office of Management and Budget to replenish the criminal ranks.

Interviews and internal records show that F.B.I. officials realized the growing danger posed by financial fraud in the housing market beginning in 2003 and 2004 but were rebuffed by the Justice Department and the budget office in their efforts to acquire more resources.

“The administration’s top priority since the 9/11 attacks has been counterterrorism,” Peter Carr, a Justice Department spokesman, told The Times. “In part, that’s reflected by a significant investment of resources at the F.B.I. to answer the call from Congress and the American public to become a domestic intelligence agency in addition to a law enforcement agency.”

Originally posted at InjuryBoard by Paul Kiesel

FBI Investigating IndyMac for Fraud, TILA Violations

Paul Kiesel — Wed, 16 Jul 2008 18:41:42 GMT

CNN reports that the FBI is currently investigating IndyMac Bancorp for fraud. The federal government is likely looking into whether IndyMac committed fraud when it made home loans to subprime and/or Alt-A borrowers throughout the subprime boom.

Currently, the FBI is only focused on the company and not any individuals. The question becomes: Is the FBI looking into any potential TILA fraud by IndyMac? The reason this becomes a key question is because several banks not only allowed loans to go out to the market with TILA violations, but they also promoted the issuing of loans with vague and fraudulent terms within TILA disclosure pages by providing greater financial compensation to mortgage brokers who sold those types of loans.

TILA fraud was very prevalent during the subprime boom. Many banks failed to disclose details of teaser rate and option-ARM loans, therefore, banks were able to issue loans that should have never hit the market (they violated the Truth in Lending Act); IndyMac is one of several banks that committed these TILA violations.

According to CNN, "In a written statement, the FBI didn't specifically comment on IndyMac but noted that it is investigating 21 corporations in the subprime lending market for possible mortgage fraud," (CNN.com, 7/16/08).

This news comes just two days after the FDIC reopened the doors of California-based IndyMac. IndyMac was once one of the nation's largest home lenders.

Originally posted at InjuryBoard by Paul Kiesel

Crooked Mortgage Brokers and Operation Malicious Mortgage

Paul Kiesel — Fri, 20 Jun 2008 20:37:08 GMT

On the same day that two Bear Stearns executives were arrested, the FBI announced that 400 people have been charged with mortgage fraud. The FBI has drastically increased its efforts, since March 1, to combat mortgage fraud, devoting 180 agents to 42 task forces.

This is only the beginning of the avalanche of information we'll receive regarding mortgage fraud. Since Bear Stearns collapsed in March, many thought that FBI inquiries would yield evidence of criminal activity contributing to all of this financial tumult. It has, and it's certain that the FBI will be arresting hundreds more and revealing many fraudulent practices that have contributed to the subprime meltdown.

Currently, the FBI is investigating about 1,400 more cases of potential fraud. Most of the arrests from yesterday revolved around small-scale schemes, and, other than the two crooked executives at Bear Stearns, it remains to be seen which other major lenders will be publicly outed and guilty of "malicious mortgage" activity. But just like the propensity of TILA disclosure fraud that has taken place over the last few years, I'm sure other lenders like Bear Stearns were as ignoble in their lending practices, particularly in regards to securitized-mortgage fraud, so it's almost certain that a few other major mortgage lenders will be taking a hard, pride and greed driven fall, much like a Shakespearean king.

We'll just have to wait and see how many more crooked mortgage brokers, real estate agents and other industry officials the FBI is able to target and arrest. Hopefully, this will prompt Congress to pass laws that allow for more oversight and transparent rules when it comes to mortgage lending.

Originally posted at InjuryBoard by Paul Kiesel

Obama and McCain: The Presidential Candidates on the Mortgage Crisis

Paul Kiesel — Tue, 17 Jun 2008 13:50:12 GMT

Here are Barack Obama's and John McCain's plans for dealing with the mortgage crisis (according to each candidate's respective website):

Barack Obama wants to create a fund to help people refinance their mortgages and provide comprehensive support to innocent homeowners. The fund will be partially paid for by Sen. Obama's increased penalties on lenders who act irresponsibly and commit fraud.

On top of this, Sen. Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

After seeing what took place in the subprime mortgage industry, Sen. Obama introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Sen. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

Sen. Obama will also create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

John McCain, after saying for months that he didn't want the government to intervene in the housing crisis, has recently come up with a housing relief plan called HOME Plan. Under his HOME Plan, every deserving American family or homeowner will be afforded the opportunity to trade a burdensome mortgage for a manageable loan that reflects their home's market value.

In order to be eligible, holders of a non-conventional mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30-year fixed-rate mortgage on the existing home.

John McCain has also recently called for the formation of a task force within the Justice Department to combat mortgage fraud, but this has already been in the works for sometime. Sen. McCain's proposal suggests that the task force's primary duty will be to aggressively investigate potential criminal wrongdoing in the mortgage industry and bring to justice any who violated the law. The DOJ Task Force will offer assistance to State Attorneys General who are investigating abusive lending practices. (The FBI has also increased their efforts two, if not, three fold over the last 90 days.)

Originally posted at InjuryBoard by Paul Kiesel

FBI: We've Got a Big Mortgage Fraud Problem

Paul Kiesel — Thu, 12 Jun 2008 15:38:30 GMT

The Federal Bureau of Investigation has ordered more than two dozen of its field offices to stop probing some financial crimes in order to focus on a surge in subprime mortgage fraud, according to the Los Angeles Timesand Bloomberg News.

The shift was made after an analysis of where agents had been deployed. Traditionally, the FBI moves investigators to address urgent needs/cases. As of today, about 150 agents were working on mortgage fraud cases.

Bill Carter, an FBI spokesman in Washington, said that, "If you''re seeing a significant crime problem, you have to move resources [and] we've got a big problem with mortgage fraud."

As mentioned over the last two months, mortgage fraud has been increasing in unsettling numbers. With reports of mortgage fraud continuing to increase, it appears that we're nowhere near an end to the fallout from the housing/foreclosure crisis.

Originally posted at InjuryBoard by Paul Kiesel

Beware of Foreclosure Con Artists

Paul Kiesel — Tue, 27 May 2008 18:08:46 GMT

As the mortgage crisis envelopes more and more borrowers into a state of delinquency or foreclosure, it is only natural that we should see an influx of "Foreclosure Rescue" advertisements, however, con artists have found this a haven to swindle desperate homeowners out of their homes.

NPR and "All Things Considered" had a great segment on Monday explaining the intricacies of companies claiming that they can refinance troubled borrowers' mortgages (when the bank won't) and help keep them in their home, when in actuality they end up taking the equity out of these homes and eventually the borrower loses the home.

The scam works in that a borrower comes into the Foreclosure Rescue's business under the impression they are refinancing a mortgage, but the crafty scam artists are actually taking possession of the home and will eventually take the equity out of the home. In the case that NPR draws upon, the borrower, thinking she was refinancing, had unknowingly transferred her home to what is called a "straw buyer," a straw buyer being someone who pays off the mortgage, and then takes out a bigger, new mortgage, thus draining the equity of the home.

According to "All Things Considered," "The straw buyers are an important part of the foreclosure rescue scam. They lend their identities and good credit to the operation and get a fee in return. The straw buyers never live in the house. Instead, the scammers ask homeowners to sign over the deed of their house for a year, while a 'foreclosure consultant' helps them repair their credit." But the credit is never repaired and in cases like these it is difficult to undo the transaction as the people who get the cash out of the home are gone by the time all of this activity is reported to the authorities. Then the original borrower is stuck in a situation where there's a huge mortgage and they've lost property rights.

The worst part is, the con artists aren't like the grifters of "The Sting" or "Paper Moon," most of them are former real estate professionals, according to FBI Assistant Director Mark Mershon. The reason for this probably lies in the fact that the con artists have to be savvy enough in real estate to understand the financial-geometry that's taking place and how to sell the idea as being a practical one to the troubled borrower.

If you're in the need of mortgage counseling or if you're trying to prevent foreclosure, take caution when pursuing an alternative "Foreclosure Prevention" company. If all else fails, it's wise to speak with an attorney who can help elucidate what rights you have as a homeowner and a borrower trying to make sense of a complicated situation.

Originally posted at InjuryBoard by Paul Kiesel