Loan Modification and Foreclosure Rescue Scams – Report from TIGTA

FOR IMMEDIATE RELEASE
June 17, 2010

FinCEN Analysis: Foreclosure Rescue Scam Reports Increase
Nature of Foreclosure Rescue Scams Shifts

VIENNA, Va. – The Financial Crimes Enforcement Network (FinCEN) today
released its first analysis of suspicious activity reports (SARs) containing
information about potential foreclosure rescue scams. The report,
<http://www.fincen.gov/news_room/rp/files/MLFLoanMODForeclosure.pdf> Loan
Modification and Foreclosure Rescue Scams – Evolving Trends and Patterns in
Bank Secrecy Act Reporting , involved an analysis of more than 3,500 SARs
filed from 2004 through 2009, of which the great majority, 3,000, were filed
last year. Additionally, FinCEN today also provided updated guidance
<http://www.fincen.gov/statutes_regs/guidance/html/fin-2010-a006.html> to
the financial industry concerning new scam techniques that financial
professionals should watch for and report.

“The increase in reporting of suspected foreclosure rescue scam activity
could mean that there is an increase in fraudulent activity but it also
reflects an increase in awareness among financial institutions of the fraud
perpetrated,” said FinCEN Director James H. Freis, Jr. “This report
emphasizes the importance of including the specific term ‘foreclosure rescue
scam’ in the SAR narrative to enable law enforcement to search for and
identify fraudulent activity more easily when reviewing SAR information,
which assists in focusing investigative resources and ultimately reducing
these scams.”

In addition to the increase in reported activity, the analysis shows that
the nature of foreclosure rescue scams had shifted during the period
examined in the study. Early SARs containing information about loan
modification/foreclosure rescue scams identified subjects purporting to be
loan modification or foreclosure rescue specialists. These subjects targeted
financially troubled homeowners with promises of assistance. The scams
involved the homeowners signing quit claim deeds, and resulted in loss of
equity in or title to their property. The scammers used straw borrowers, who
misrepresented income, employment, or occupancy, or provided other
fraudulent information to deceive a new lender into making a new mortgage
loan.

The scams described in later SARs and analyzed in this report, reflect an
evolution into advance fee schemes, in which purported loan modification or
foreclosure rescue specialists promised to arrange modification of a
homeowner’s mortgage for more favorable repayment terms. Following receipt
of large advance fees, scammers rarely, if ever, provided any service. A
variation of the advance fee scam involved phony debt elimination programs
in which the homeowners paid advance fees and were given bogus documents, or
were instructed to contact their lenders with specious assertions that the
original mortgage debt was illegal.

The top ten metropolitan regions, ranked by the concentration of local
subjects of all mortgage loan fraud SARs reported between January 1, 2009
and June 10, 2010, are as follows:

Due to its national and international networking and coordination mission,
FinCEN is actively involved with a number of initiatives that focus on
combating mortgage fraud and ensure that financial institutions are not used
as conduits for illicit activity. Among its initiatives is an April 2009
FinCEN advisory, updated today, to provide indicators, or red flags, of loan
modification and foreclosure rescue fraud, and request that filers who
become aware of this type of activity include the term “foreclosure rescue
scam” in the SAR’s narrative section to assist law enforcement in
identifying applicable reports.

Today’s report supports the efforts of the Financial Fraud Enforcement Task
Force (FFETF), established by President Obama in November 2009 to wage an
aggressive, coordinated, and proactive effort to investigate and prosecute
financial crimes. Additionally, FinCEN efforts are being further developed
as part of the FFETF anti-mortgage fraud initiative to provide not only
information sharing based on SAR data, but also to support law enforcement
investigations and prosecutions. FFETF is composed of representatives from a
broad range of Federal agencies, regulatory authorities, inspectors general,
and State and local law enforcement, and is the broadest coalition of law
enforcement, investigatory and regulatory agencies ever assembled to combat
fraud. FinCEN has been actively involved in these efforts, as Suspicious
Activity Reports are one of the best sources of lead information for law
enforcement in fighting financial crime.

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