Housing Bust Leads to Rise in Mortgage Scams

When he was Governor of California in the 1970s, Jerry Brown got the nickname “Governor Moonbeam” for his hippy-dippy ways. But he’s pretty shrewdly getting attention these days for targeting scammers who prey upon distressed homeowners.

Brown is currently California’s Attorney General and is mulling a run for governor again. On July 15 he’s announcing a major new initiative to crack down on massive loan modification scams operating in Los Angeles and Orange County. The move is part of a national crackdown orchestrated by the Federal Trade Commission called “Operation Loan Lies.”

On July 6, Brown’s office sued a “foreclosure consultant” and an attorney who allegedly conned 2,000 desperate homeowners, telling them they could save their homes by filing bogus lawsuits against lenders. The suits claimed the mortgages were no longer valid because the loans had been sold so many times on Wall Street. The alleged scammers charged the homeowners thousands of dollars in fees. Many still lost their homes.

In May, Brown obtained a guilty plea from a woman who used forged documents to convince more than 100 homeowners to hand over an average of $3,000 for non-existent loan modification services. In March his office shut down Foreclosure Freedom, a fraudulent loan modification company that continued to collect fees and mortgage payments from dozens of homeowners without ever providing services.

There was plenty of fraud going on during the housing boom. It’s even worse today, as desperate people living on the financial edge are being scammed.

Brown’s office offers these tips for homeowners

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before they give you a written contract describing the services they promise to provide and before they actually perform all the services described in the contract.

DON’T transfer title or sell your house to a “foreclosure rescuer.”

DON’T pay your mortgage payments to someone other than your lender or loan servicer.

DON’T sign any documents without reading them first.

DO call your lender yourself.

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