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Foreclosure Rescue Scams & Loan Modification Fraud

On November 17, 2009, the Departments of Justice, Treasury, Housing and Urban Development (HUD), and the Securities and Exchange Commission (SEC) announced the establishment of an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The task force's leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets, and recover proceeds for victims. In prepared remarks for a news conference regarding the task force, Treasury Secretary Timothy Geithner announced that "Treasury's Financial Crimes Enforcement Network has pursued more than 100 cases, partnering with 31 state attorneys general who are aggressively cracking down on mortgage fraud and are shutting down suspect companies."

Two months earlier on September 17, 2009, Secretary Geithner hosted FinCEN Director Jim Freis, Attorney General Eric Holder, HUD Secretary Shaun Donovan, Federal Trade Commission (FTC) Chairman Jon Leibowitz, and attorneys general from 12 states to discuss emerging trends and strategies to combat fraud against consumers in the housing markets as well as best practices to bolster coordination across State and Federal agencies. Participating in the meeting were attorneys general Dustin McDaniel, Arkansas; Terry Goddard, Arizona; Richard Blumenthal, Connecticut; Lisa Madigan, Illinois; Tom Miller, Iowa; Doug Gansler, Maryland; Chris Koster, Missouri; Catherine Cortez Masto, Nevada; Roy Cooper, North Carolina; Richard Cordray, Ohio (by phone); Patrick Lynch, Rhode Island; Rob McKenna, Washington (by phone). Collectively, these offices have taken action on scores of fraud cases in the housing markets and opened hundreds of investigations.

Treasury, FinCEN, DOJ, HUD, and the FTC are committed to curbing abuse by coordinating information and focusing resources in their fraud investigations. This includes alerting financial institutions to emerging schemes, stepping up enforcement actions, and educating consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.

At the September event, the FTC announced two new law enforcement actions in a continuing crackdown on mortgage foreclosure rescue and loan modification scams, bringing to 22 the number of these cases the Commission has filed since the housing crisis began. The FTC also announced developments in similar pending mortgage-related actions, several of which have involved coordinated case work from FinCEN.

This meeting followed up on an announcement by the Obama Administration in April of a multi-agency crackdown on foreclosure rescue scams and loan modification fraud, aligning responses from Federal law enforcement agencies, State investigators and prosecutors, civil enforcement authorities, and the private sector to protect homeowners seeking assistance under the Administration's Making Home Affordable program from criminal actors looking to perpetrate predatory schemes.

At the April event, Treasury and FinCEN announced an advanced targeting effort to combat fraudulent loan modification schemes and coordinate ongoing efforts across agencies to investigate fraud and assist with enforcement and prosecutions. In less than a week, FinCEN's new targeting effort produced leads that helped various agencies halt the illegal practices of those offering loan modification or foreclosure scams. FinCEN continues to marshal information about possible fraudulent actors, drawing upon a variety of data available to law enforcement, regulatory agencies, and the consumer protection community, for the purpose of identifying and proactively referring potential criminal targets to participating law enforcement authorities.

In addition, Treasury has issued an advisory through FinCEN, alerting financial institutions to the risks of emerging schemes related to loan modifications. The advisory identifies certain "red flags" that may indicate a loan modification or foreclosure rescue scam and warrant the filing of a SAR by a financial institution. Examples of possible signs of fraudulent activity, such as requiring that fees be paid before services are provided, are listed in the advisory. In addition, the advisory requests that financial institutions include the term "foreclosure rescue scam" in the narrative sections of all relevant SARs.

For information on the Administration's Making Home Affordable program, please visit www.MakingHomeAffordable.gov.

For free foreclosure counseling assistance, please call the Homeowner's HOPE Hotline at 1-888-995-HOPE.

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