Foreclosure Rescue Schemes Remain at High Levels and Have Become More Complex

Since our report in 2010, data collected by federal agencies suggest that  foreclosure rescue schemes have increased. These data show an increase each year from  2009 to 2011, and a slight decline in the number of complaints in 2012. Consumer Complaints and Suspicious Activity Reports about Foreclosure Rescue Schemes Increased after 2009

			Consumer Complaints Reported by FTC and Lawyers’ Committee

FTC’s Consumer Sentinel Network, an online database available to law  enforcement agencies, compiles consumer complaints received by FTC  and law enforcement and other organizations, including other federal and  state agencies and nonprofit organizations. Treasury’s Financial Crimes Enforcement Network (FinCEN) receives  SARs from financial institutions about suspected violations of financial  laws and regulations. More Complex Schemes Have Emerged, and Some Groups Continue to Be Targeted

Several agency officials and representatives of nonprofits told us that  foreclosure rescue schemes had become more complex over time. The apparent increase in the prevalence of schemes involving attorneys  has created new challenges for law enforcement. Officials we spoke with for this report noted that some populations  continued to be the targets of these schemes. Agency officials and representatives of other organizations continued to  cite the challenges to combating these schemes that we noted in 2010. FFETF Members Have Focused on Prevention, Detection, and Enforcement to Combat Foreclosure Rescue Schemes

Since we last reported on this issue in 2010, FFETF and its members  have undertaken a number of activities intended to enhance coordination  among federal, state, and local authorities responsible for combating  foreclosure rescue schemes. Examples of MFWG’s outreach and  education efforts include holding regional education summits for  distressed homeowners, housing counselors, and public advocates and  directing more individuals to FFETF’s mortgage fraud information on its  website, StopFraud.gov, which FFETF considers a one-stop site for  consumers to learn how to protect themselves from becoming victims and  to report cases of fraud. In addition, CFPB has begun collecting consumer  complaints about these schemes and submits them to the FTC’s  Consumer Sentinel Network. MFWG Has Focused on Facilitating Information Sharing and Coordination as Key Efforts to Enhance Enforcement

Multiple representatives of MFWG member agencies that we contacted  told us that MFWG had facilitated information sharing and coordination  among enforcement agencies on investigations. Between 2009 and 2012, working group members using joint  investigations and broad enforcement initiatives coordinated their  investigations and successfully filed criminal charges against more than  226 defendants allegedly involved in foreclosure rescue schemes. Cases were also filed  against 128 civil defendants in federal courts across the country. In its written comments, Treasury noted that it valued GAO’s insights as it  continues to combat foreclosure rescue schemes. SIGTARP in its written comments stated that it concurred  with the sections of the report related to SIGTARP’s work and noted that  it has made significant progress in combating these schemes and will  continue to work with law enforcement partners to investigate them. We also contacted seven  member agencies of the Financial Fraud Enforcement Task Force’s  (FFETF) Mortgage Fraud Working Group (MFWG) that were active in  combating foreclosure rescue schemes—the Consumer Finance  Protection Bureau, the Department of Justice, the Federal Housing  Finance Agency and its Office of Inspector General, FTC, the Department  of Housing and Urban Development and its Office of Inspector General,  the Department of the Treasury, the Special Inspector General for the  Troubled Asset Relief Program, and the U.S. We also  spoke with a number of nonprofit organizations that are actively  addressing these schemes. To determine the status and scope of the federal government’s  multiagency effort and other major efforts to combat these schemes, we  interviewed officials and obtained relevant documentation from FFETF  and MFWG members listed previously.
Why GAO Did This Study

In July 2010, GAO reported on federal efforts to combat foreclosure rescue schemes--schemes that promise but do not deliver foreclosure prevention assistance. Subsequently, the Dodd-Frank Wall Street Reform and Consumer Protection Act required GAO to study interagency efforts to crack down on these schemes. This report updates GAO's 2010 report and examines (1) available information about the prevalence and nature of foreclosure rescue schemes, and (2) the status and scope of the federal government's multiagency effort and other major initiatives to combat them. To address these objectives, GAO analyzed consumer complaints, obtained information from federal agencies participating in FFETF, and interviewed representatives of six states with high populations of borrowers at risk of foreclosure, and nonprofit organizations that are also making efforts to combat these schemes.
In its written comments, Treasury noted that it valued GAO's insights as it continues to combat foreclosure rescue schemes. The Special Inspector General for the Troubled Asset Relief Program concurred with the findings related to its work and noted that it has made significant progress in combating these schemes and will continue to work with law enforcement partners to investigate them.

What GAO Found

Foreclosure rescue schemes remain at historically high levels and have become more complex. The Federal Trade Commission's (FTC) Consumer Sentinel Network--an online database of consumer complaints received by FTC, law enforcement agencies, and other organizations--showed that complaints about these schemes rose from around 9,000 in 2009 to more than 18,000 each year in 2010, 2011, and 2012. In addition, the Financial Crimes Enforcement Network reported steady increases over the same period in the number of Suspicious Activity Reports (SAR)--reports filed by financial institutions about suspected violations of financial laws and regulations--related to these schemes. Agency officials and representatives of nonprofits told GAO that the schemes had become increasingly complex, creating challenges for law enforcement. For example, schemes involving attorneys--which tend to involve greater losses--had become more common in recent years following a regulation that bans upfront fees, but provides an exception for attorneys. These schemes present unique challenges because attorneys typically collect fees upfront and enforcement officials have difficulty trying to determine whether attorneys are providing legitimate services. Furthermore, officials and representatives of nonprofits also noted that some populations, including minorities and the elderly, continued to be targeted.
Since GAO last reported on this issue in 2010, the Financial Fraud Enforcement Task Force (FFETF) and its members have undertaken a number of actions to educate borrowers on how to avoid being victimized by these schemes. These efforts have also emphasized the need for consumers and institutions to report possible fraudulent schemes and the importance of enhanced information sharing among law enforcement agencies investigating and prosecuting these schemes. Specifically, FFETF members have developed and participated in various outreach efforts, including hosting regional education summits for distressed homeowners, counselors, and law enforcement officials and directing more individuals to resources on FFETF's mortgage fraud webpage, StopFraud.gov. FFETF member agencies' fraud detection efforts have focused on gathering information from SARs and complaints from the FTC Consumer Sentinel Network and sharing this information among members. Member agencies that GAO contacted also indicated that information sharing and coordination on investigations among FFETF members had led to joint investigations and broad enforcement initiatives. For example, one year-long multiagency effort resulted in criminal charges against 107 defendants. Cases were also filed against 128 civil defendants in federal courts across the country.