Loan Modification Scam Prevention Network
In the midst of the current economic turmoil and foreclosure crisis, millions of distressed homeowners have become vulnerable targets to unscrupulous and sometimes criminal third-party scammers, con-artists, and thieves. These homeowners, desperate to keep their homes, are at risk from individuals and companies posing as "loan modification specialists," some of whom are the very people who previously peddled subprime loans. The alleged "rescuers" employ various scams with disastrous consequences for homeowners: phantom foreclosure counseling, lease-back or repurchase scams, fraudulent refinance, fraudulent loan modification, bankruptcy foreclosure, and reverse mortgage fraud. While waiting for the promised relief, homeowners not only lose their money but often fall deeper into default and lose valuable time.
Federal, state and local law enforcement, as well as national, state and local civil rights, housing, legal aid, and consumer protection non-profit organizations are working hard to stop the proliferation of loan modification scammers. However, these scammers are highly mobile and easily able to move from one community to another. In addition, resources both at the governmental level in prosecuting scammers and legal aid organizations in assisting or representing individual homeowners who may have been scammed are stretched thin.
Response to the Crisis
As a result, a coordinated national campaign has been initiated to strengthen the fight against these scammers and support existing efforts at the national, state and local levels. The lead organizations of the effort include Fannie Mae, the Federal Trade Commission, Freddie Mac, the Homeownership Preservation Foundation, the Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and NeighborWorks AmericaTM, among others, with representatives from key governmental agencies, such as the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Justice, the U.S. Treasury Department, the Federal Bureau of Investigation, and state Attorneys General offices, as well as leading non-profit organizations from across the country also participating.
This new, broad coalition includes a two-part response. First, NeighborWorks is leading a national media and outreach campaign to educate homeowners and the public on potential scams. (Please visit the NeighborWorks' website on this effort www.loanscamalert.org.) Second, the Lawyers' Committee is leading an effort to increase reporting and prosecution of alleged scammers to support ongoing enforcement efforts at the federal, state and local levels.
The Loan Modification Scam Prevention Network
The Lawyers' Committee through its newly created Loan Modification Scam Prevention Network (LMSPN or Network) is leading a large-scale mobilization of pro bono legal resources in a comprehensive national campaign to enhance and support existing state and local efforts and create coalitions where needed to crack down on scammers, increase scam reporting, educate homeowners, and work with law enforcement. This comprehensive campaign will include:
- National Complaint and Data Collection - A coordinated effort to increase the number of scam complaints filed through a fully integrated national database that will provide partner organizations and homeowners in all states and jurisdictions multiple ways to report scams, facilitate data-sharing and reporting, empower coalition partners, ensure complaints are filed with the appropriate law enforcement agencies, and help the Network identify trends;
- Empowering Local Organizations - Strong coordinated programs on the ground in targeted states and localities connecting pro bono legal leadership to existing local coalitions (or creating local coalitions where appropriate) to increase local enforcement activities, assist homeowners, collect information and individual scam reports and complaints, educate the public, and support commonsense legal and policy reforms;
- Direct Homeowner Contact - Over 2,000 pro bono legal volunteers, who will contact homeowners who have reported scams and are determined to be most in need of further assistance, conduct a more substantive intake to collect detailed information about scammers and how they operate, transmit this information to appropriate law enforcement agencies and ensure that homeowners have the information and resources they need;
- Increased Enforcement Actions - High impact litigation, where appropriate, which will be coordinated closely with governmental law enforcement and local legal organizations that are representing victims of scams; and
- Public Education - A strategic public education effort, utilizing both online and offline tools, to use the information in the database and the experience of leaders on the ground to help homeowners identify and avoid scams and paint the clearest picture of the havoc wrought by loan modification scammers.
National Complaint and Data Collection
A key to increasing reporting and enforcement efforts is the Network's sophisticated and user-friendly national web database to capture information and complaints about alleged loan modification scams. By filtering data through the LMSPN database created by the Lawyers' Committee, the coalition will be able to ensure complaints are filed with the appropriate law enforcement authorities and build a comprehensive record of loan modification scams to be used for private enforcement and public education campaigns by local and national partners.
Loan modification scam complaints will be filed into the database in a variety of ways. First, homeowners will be able to report complaints against alleged scammers themselves via a public form on the Lawyers' Committee website (www.preventloanscams.org). Second, organizations holding foreclosure prevention clinics, HUD certified housing counselors and lawyers assisting homeowners in modifying their loans across the country will be able to use multiple platforms to forward scam complaints to the Network. Finally, both local and national hotlines (such as the Homeowners' HOPE Hotline, operated by the Homeownership Preservation Foundation - www.995HOPE.org) will identify and refer victims' information to the Network's database.
This new database is vital for several reasons. For one, unlike federal, state and local governmental agencies, which cannot share complaint data with non-profit organizations, this database will be available to our partners, both public[1] and private, thereby increasing the possibility of private enforcement actions. In addition, because scammers operate across state and county lines, collecting complaints in a national database, instead of being captured in silos by jurisdiction, will allow LMSPN and its partners to better analyze trends and get a broader picture of the activities by scammers. The number of complaints filed should increase across the nation due to a simplified intake questionnaire available for HUD certified counselors, hotlines, legal aid lawyers and organizations holding clinics. Instead of only referring homeowners to other sources, complaints can be filed on-site, reducing the chance of homeowners not following through on their own. Finally, we hope to save valuable resources at the state and local level by having this database available for use at no cost.
Empowering Local Organizations
The primary objective of this effort is to bring additional resources to bear in support of existing foreclosure prevention and loan scam programs at the state and local level, including empowering them with current information on scamming and potential victims. Providing local programs with an effective referral capacity is critical to a coordinated national crack down on loan modification scammers because they easily operate across state lines, shut down quickly when under pressure, and reopen at another address or in another jurisdiction. To that end, the Lawyers' Committee will use national, state and local legal leadership and pro bono resources to support existing state and local coalitions, and, where needed, assist in bringing together coalitions of local organizations and law enforcement. These local task forces will work together to increase scam reporting, analyze complaints collected in the database, spearhead local public education efforts, push for strong anti-scamming policies and rules, support governmental enforcement, and bring private enforcement action when necessary. This coordinated work at the local level, supported by the resources and expertise of national organizations, will make it more difficult for scammers to continue to operate.
Direct Homeowner Contact
Using the LMSPN database, the Lawyers' Committee will identify up to 50,000 homeowners (prioritized by location, type of scam, and other factors) to be contacted by more than 2,000 trained legal volunteers to gather additional vital information about the nature of, and documents related to, their situation. This direct contact with homeowners will allow the Network to collect even further detailed information about how scammers operate to aid analysis and enforcement efforts. In addition, volunteers will provide homeowners with information and resources to assist them with their situation. Homeowners who are not contacted directly by homeowners will still receive information via the Network's eSupport system. Through this system, the Network will send emails to homeowners with local information on how to avoid a scam, news on enforcement actions against scam individuals and companies, and local resources available to help them fight scamming and receive assistance in modifying their mortgages. Homeowners will also be able to provide additional information about their situation via an online intake form.
Increased Enforcement Actions
While legal volunteers will not be representing individual homeowners through the Network (nor will they enter into an attorney-client relationship), it is strongly anticipated that there will be increased enforcement actions against scammers through both private and government efforts. The Lawyers' Committee and our on the ground partners will work closely with state and local law enforcement officials to share complaints in the Network's database and any identified analysis of scamming patterns. If broad patterns of illegal scamming are detected in gathering information from victims, the Lawyers' Committee, among others, will consider bringing high impact litigation through its pro bono legal network. In addition, the Lawyers' Committee will work with local task forces to identify legal assistance that may be available to individual victims of scams.
Public Education
Scammers are most effective when they are able to prey on an unsuspecting populace. Homeowners who are not fully educated about this issue are more likely to fall victim to scammers and less likely to report suspicious activity to law enforcement, LMSPN, and local organizations. To that end, the Network will supplement NeighborWorks' media program through the use of the information collected through the database and experiences of local leadership in a strategic earned media campaign. The media campaign will publicize resources available to homeowners and information on filing a complaint, common tactics used by scammers, tips on how to avoid a scam, news on enforcement actions against scam individuals and companies, and other updates on the Network's activities.
Additionally, the Lawyers' Committee is launching its own website -- www.preventloanscams.org -- to serve as a nationwide clearinghouse for loan modification scam information on complaints filed, laws and regulations, and enforcement actions. In addition to an online complaint form that will enter data directly into the Network's database, the website will provide homeowners with state-by-state information about the rules, regulations and resources available to them, information on how to avoid a scam, and news and information on enforcement efforts. To further paint the picture of the loan modification scam problem, the website will also provide a public portal into the LMSPN database and allow users access to non-personal information that may be searched and sorted by jurisdiction, scam problem, and other criteria.
All complaints will be sent to the Federal Trade Commission's Sentinel Database, which is available to federal, state and local law enforcement officials. This agreement has been formalized.
