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Cascade: No. 72, Fall 2009

States Fight Foreclosure Rescue Scams

As part of a growing concern about foreclosure rescue scams, Pennsylvania, New Jersey, and Delaware are filing lawsuits, issuing cease and desist orders, and mounting advertising campaigns to reach homeowners who need help.

Marge DellaVecchia, executive director of the New Jersey Housing and Mortgage Finance Agency, said, "Although legitimate assistance from HUD-certified housing counselors is available without charge to homeowners, too many homeowners are falling victim to foreclosure rescue scams being perpetrated by individuals and companies that are not licensed by any state or federal agency and that are charging homeowners for help that is not forthcoming."

Legal Actions

The state of New Jersey has filed a total of 11 civil mortgage fraud lawsuits since June 2008. The lawsuits have named 102 individual and corporate defendants whose actions have affected more than 950 victims, as well as property worth more than $29.1 million.

New Jersey has also obtained indictments or guilty pleas in seven criminal mortgage fraud cases involving a total of 10 defendants. The defendants have been charged with victimizing close to 60 individuals and banks in connection with loans worth approximately $11 million.

Delaware's attorney general has filed two cases alleging mortgage rescue fraud since October 2008. The cases involved four individuals and one corporate defendant.

Administrative Actions

In May, the Pennsylvania Department of Banking (DOB) issued cease and desist orders to six out-of-state mortgage modification companies. The DOB is also working with servicers and the Pennsylvania Housing Finance Agency (PHFA) and sending letters that encourage homeowners to seek help from qualified housing counseling agencies, caution homeowners about companies offering to help modify mortgages for a fee, and publicize assistance available from the state's programs.

A working group of representatives from the PHFA, the attorney general's office, the DOB, and the department of state has been meeting since May 2009 to address consumer complaints that have been received by housing counselors. The complaints substantially concern foreclosure rescue scams. The agencies explore whether companies cited in the complaints are properly licensed, have posted required bonds, and have complied with other laws.

The agencies and offices discussed complaints involving 41 companies at a July 16 meeting, said Bob Bobincheck, director of strategic planning and policy at the PHFA. Bobincheck noted that "a lot of the results of the inquiries are behind the scenes."

In Delaware, the attorney general's Mortgage Fraud Task Force was launched in June 2009. Composed of the Delaware Department of Justice, the Delaware State Housing Authority, Office of the State Bank Commissioner, Delaware's HUD-certified housing counselors, and nonprofits that provide housing services, the task force sponsored three housing workshops that brought together homeowners, state agencies, housing counselors, nonprofits, and mortgage servicers. The task force provides operational and marketing support of housing events coordinated by member agencies. Homeowners are directed to a unified statewide housing events calendar at www.deforeclosurehelp.org. External Link The attorney general's Mortgage Hotline has been established at (800) 220-5424 for mortgage assistance and referral services.

Legislation

Two Pennsylvania bills were signed into law in June. One prohibits a mortgage broker or originator from being the sole recipient of communications from lenders in an effort to ensure that consumers receive monthly statements and other notices intended for them by their lenders. The other bill protects mortgage company employees who report illegal activity or take part in an investigation from retaliation through reduced salaries, termination, or other actions.

Delaware's Mortgage Rescue Fraud Protection Act, which took effect January 1, 2009, protects homeowners after an action for foreclosure is filed on a principal residence. The act regulates foreclosure consultants who claim that they can save a homeowner from foreclosure, for a fee, by requiring that a consultant sign a written contract with the homeowner that includes all the terms and provides for a right of cancellation. Moreover, the act prohibits payment before services are complete. Details are at www.attorneygeneral.delaware.gov/mortgageforeclosure. External Link

Consumer Education

Pennsylvania and Delaware are mounting advertising campaigns to encourage homeowners to seek help from qualified housing counseling agencies and to caution homeowners about companies offering to help modify mortgages for a fee.

In Pennsylvania, the PHFA will sponsor the ads, including some in conjunction with the DOB, explained Bobincheck. All the ads will direct consumers to the state's housing counseling network and will contain contact information for counseling agencies in the area, he said, adding that "most of the advertising will be on radio and television, although as we move into the more rural areas of Pennsylvania we will use more print ads and ads on gas pumps."

Delaware's marketing campaign will include advertising on billboards and buses about a state-directed website, www.deforeclosurehelp.org, External Link and a hotline operated by the Delaware attorney general's Office of Consumer Protection at (800) 220-5424. Foreclosure prevention workshops will be listed on the website.

In addition, New Jersey provides a consumer brief, "Foreclosure Scams: How to Avoid Them," at http://www.njconsumeraffairs.com/brief/foreclosure.pdf. PDF External Link

Foreclosure Mediation Programs

New Jersey's Judiciary Foreclosure Mediation Program enables qualified homeowners who are facing foreclosure to receive help from HUD-certified housing counselors, licensed attorneys, and a neutral mediator to resolve loan delinquencies. Distressed homeowners can call the state's hotline at (888) 989-5277 or visit www.njforeclosuremediation.org. External Link

A proposed court-supervised Residential Mortgage Foreclosure Mediation Program in Delaware is under review by the state's Superior Court. The program would require lenders' attorneys filing foreclosures to notify homeowners of the availability of a state hotline and of housing counselors who could assist them. Mediation sessions supervised by volunteer attorneys would be held in each county.*

Foreclosure Resource Center

A wide range of information on foreclosures, including community resources, is available on the Philadelphia Fed's Foreclosure Resource Center at http://www.philadelphiafed.org/
foreclosure/
.

For information, contact Bob Bobincheck at (717) 780-1801 or bbobincheck@phfa.org; E-mail www.phfa.org; External Link http://www.state.nj.us/dobi/njhope/; External Link James J. Savage at (973) 877-1280 or james.savage@dol. lps.state.nj.us; E-mail http://www.state.nj.us/dobi/njhope/; External Link Matthew Heckles at (302) 577-5001 or matthew@destatehousing.com; E-mail www.attorneygeneral.delaware.gov/mortgageforeclosure; External Link deforeclosurehelp.org; External Link http://www.destatehousing.com/. External Link

  • * The Philadelphia Court of Common Pleas started a Residential Mortgage Foreclosure Diversion Pilot Program in April 2008.