Foreclosure-Rescue Scammers

By Sheridan, Terry | Mortgage Banking, December 2012 | Go to article overview
Save to active project

Foreclosure-Rescue Scammers

Sheridan, Terry, Mortgage Banking

There's a new twist to the old problem of foreclosure-rescue and loan-modification scams: More lawyers face charges for involvement in them. * It's still the usual cat-and-mouse game of false promises to reduce loan payments and prevent foreclosure with pay-me-first fees. Scammers have done that for years. But since the 2008 financial crisis and housing downturn, unfortunately, they've found especially easy pickings among millions of desperate homeowners who face foreclosure if and when efforts to modify their mortgages fail. * In 2010, approval of the Federal Trade Commission's (FTC's) Mortgage Assistance Relief Services (MARS) rule made it illegal to charge upfront fees for assistance. The fees-ban portion of the law took effect in January 2011. The rule now is known as Regulation O. * To get around that ban, scammers enlist the help of lawyers. Or, they are lawyers. That allows upfront fees to be charged, because everyone knows that lawyers charge fees for their services. Thing is, a big part of the scam is that they aren't providing services. And this problem is increasing. * In 2010, 18 percent of modification and foreclosure-rescue complaints involved lawyers, says Yolanda McGill, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers' Committee for Civil Rights Under Law, Washington, D.C. The committee maintains a complaint database.

By the end of 201 1, 32 percent of the complaints involved lawyers. To date this year, that had risen another 4 percent.

"There's definitely an uptick in cases against lawyers in this area," says James Kohm, associate director of the FTC's Enforcement Division in Washington, D.C.

According to the FTC, Regulation 0 allows lawyers to charge an upfront fee only if they are licensed to practice law in the state where the homeowner lives or where the house is located; they provide "real" legal services; they comply with state ethics requirements for attorneys; and they place payments in a client trust account and withdraw fees from that account as they complete legal services, and tell the client about the withdrawal.

The numbers of lawyers involved in the wrongdoing--or charged with it--have grabbed the attention of the legal community in a big way.

The American Bar Association (ABA) hosted a panel discussion on mortgage loan-modification and foreclosure-rescue scams in October. Panelists included J. Reilly Dolan, assistant director for financial practices at the FTC; Mary Alestra, special counsel to the New York Attorney General's Bureau of Consumer Frauds and Protection; David Berenbaum, chief program officer for the National Community Reinvestment Coalition, Washington, D.C.; and Sheila Tuma, counsel to The Florida Bar, Orlando, Florida.

Moderators were the Fair Housing and Fair Lending Project's McGill; and Rutledge Simmons, deputy general counsel for NeighborWorks America, Washington, D.C., a national network of community development and affordable-housing groups.

"Everyone agreed that working with these scammers is not feasible as a lawyer" without putting themselves at risk, Simmons says.

Late last year, the Treasury Department and the Consumer Financial Protection Bureau (CFPB) formed a special joint task force with the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) to target loan-modification and foreclosure-rescue scams.

And the FTC is among dozens of federal law-enforcement, regulators and investigative agencies included in the Financial Fraud Enforcement Task Force (FFETF) established by President Obama in 2009.

"It is so needless for homeowners to be taken in by this," McGill says. "They don't need an attorney to modify a loan. What is so bad here is that you have professionals horning in on this because they can make good bucks."

While foreclosure defense is a legitimate legal practice, "That's not what these people are doing," she says of the lawyers involved in the scams.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

Foreclosure-Rescue Scammers


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.