A foreclosure sign hangs on a fence in front of a foreclosed home in 2011 in… (Justin Sullivan / Getty…)
WASHINGTON --Since early 2010, a leading civil rights group has helped compile a database of approximately 26,000 complaints about mortgage modification scams -- attempts by fraudsters to take advantage of those hardest hit by the housing market meltdown.
The people making those complaints have reported losses of $63 million to the National Loan Modification Scam Database. And the Lawyers' Committee for Civil Rights Under Law, which manages the database, has filed 10 civil suits in conjunction with other organizations to try to halt mortgage assistance operations in California and New York.
The group said it was happy to hear that federal officials were cracking down on the scams with criminal charges, which adds another dimension to the fight in addition to civil fines.
“For some of these folks, the fines might be the cost of doing business,” said Yolanda McGill, senior counsel in the Fair Housing and Lending Project at the lawyers' group. “So the risk of jail time is important in all the efforts going on to stop this.”
U.S. Atty. Gen. Eric H. Holder and other officials on Tuesday said the government's Distressed Homeowner Initiative had filed criminal charges against 530 people during the fiscal year that ended Oct. 1.
The defendants were accused of defrauding about 73,000 underwater homeowners of a total of $1 billion nationwide.
"Distressed homeowner schemes have displaced loan origination fraud as the most common type of mortgage fraud in many areas of the country," said Kevin Perkins, the FBI's associate deputy director, who was among the officials announcing the results of the crackdown.
In addition to criminal charges, there have been 110 federal civil cases filed against more than 150 defendants. Those cases allege that an additional 15,000 victims were bilked out of a combined $37 million by mortgage-assistance scams.
Even as the housing market shows signs of a rebound, the stream of complaints about those scams has continued, McGill said. The database received 1,005 complaints in September, with the most -- 169 -- coming from California.
“This type of fraud is a little bit like whack-a-mole ... and these outfits engaged in this are making money hand over fist,” she said.
The database is a project of the Loan Modification Scam Prevention Network, a national coalition of government agencies, nonprofit organizations and service providers that includes the Department of Housing and Urban Development, Fannie Mae and Freddie Mac.
Federal officials, who have access to the database, told the lawyers' group this year that they were going to focus more on fraud against distressed homeowners, said Linda Mullenbach, also a senior counsel in the Fair Housing and Fair Lending Project.
“Any type of assitance to shut these operations down is very much valued,” she said.
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