This article first appeared in the St. Louis Beacon, June 11, 2010 - The attorneys general of Missouri and Illinois have a message for scammers preying on desperate homeowners in their states: They will find you.
"It is not a matter of whether we will find you, it is simply a matter of when we will find you,'' said Attorney General Lisa Madigan, who has been prosecuting mortgage scams in Illinois for several years.
Joining with Chris Koster, her Missouri counterpart, Madigan stressed the dangers of one of the newest forms of mortgage fraud that has spread with the economic downturn: companies that illegally charge upfront fees to help troubled homeowners get mortgage modifications but then provide no help or services.
On Friday, they joined forces with local housing advocates to push a new campaign that they say offers the most effective detriment to the growing fraud: educating homeowners about the scams.
"Public education is really the best weapon that we have found for combating this,'' said Koster, who says his office has seen an "explosion" in complaints about such companies.
The warning signs
Scammers contact financially troubled homeowners with personalized messages that can appear very official, using information obtained through public records of foreclosures. Thesesolicitations can come by mail, online or phone. Beware of companiesthat:
- Require the consumer to pay an upfront fee for which they promise to work with your lender to modify, refinance or reinstate your mortgage.
- Guarantee they can stop a foreclosure or get your loan modified.
- Advise the borrower to stop paying their lender and to pay them, instead.
- Pressure consumers to sign paperwork they haven't had a change to read or don't understand.
- Claim to offer "government-approved" or "official government" loan modifications.
- Ask troubled homeowners to release personal financial information online or over the phone.
The kickoff campaign was held at the Federal Reserve Bank of St. Louis and also included Steven Baker, the Midwest director of the Federal Trade Commission and representatives of local housing groups that provide free HUD-certified counseling for at-risk homeowners.
Koster said that his office has prosecuted about a dozen foreclosure prevention scammers operating within the state and is investigating about a dozen more. But he warned that the operations continue to morph and have become more sophisticated -- and they have gone online so they can prey upon Missouri residents from outside the state.
Both Madigan and Koster stressed that it is illegal in their states for companies to charge upfront fees for foreclosure prevention. These fees can range from hundreds to thousands of dollars from victims who are already financially desperate.
Madigan, who said she has investigated all types of consumer fraud, called loan modification scams among the worst cons she has seen.
"These are truly con artists,'' she said. "They are nothing more than opportunistic predators. They prey on the fears of hardworking individuals and families who are on the verge of losing their homes. All they are actually selling these people is false hope."
Madigan said that by prosecuting mortgage scams her office has managed to get more than $1.2 million in restitution for Illinois residents but acknowledged that it is very difficult to help consumers get their money back.
"I have never seen a legitimate for-profit loan modification service, so don't believe them when they approach you,'' she added.
With foreclosure rates continuing to grow in the St. Louis area, the panelists urged homeowners who are in financial trouble to reach out to nonprofit HUD-certified loan counselors who can advise them on loan modifications -- and to contact their own lenders.
After the conference, volunteers from local agencies such as Beyond Housing planned to visit neighborhoods in St. Louis, St. Charles and St. Clair counties to distribute bright yellow doorknob hangers warning consumers about loan modification scams.
How to report suspected scams:
Missouri attorney general, consumer protection hotline: 1-800-392-8222
Illinois attorney general homeowner helpline: 1-866-544-7151
FTC scam hotline: 1-877-382-4357 and www.LoanScamAlert.org
Need help with a modification?
Contact a local nonprofit HUD-approved housing counselor by calling the United Way at 211 or 1-800-427-4626.