Nature of These Schemes Makes Them Difficult to Combat, and Legal Approaches Vary by State

State law enforcement officials noted that these schemes are difficult to  combat because state law enforcement authorities are often unable to  locate the persons who committed the schemes or provide restitution to  the victims. Although Data That Can Be Used to Describe the Prevalence of Schemes Are Limited, Some Information Suggests That Schemes Are an Important Problem

Federal law enforcement agencies with key roles in combating these  schemes—FTC, FBI, and the Executive Office for U.S. Attorneys in our five case-study states  provided anecdotal observations that support their belief that these  schemes are a problem. Federal Efforts to Combat These Schemes Are Part of a Broader Focus on Mortgage Fraud, and a Public-Private Effort Focuses on Consumer Education

The primary multiagency effort to combat financial crimes, including  foreclosure rescue schemes, is the FFETF, which an executive order  established in November 2009. Current Federal Effort to Combat These Schemes Is the FFETF, Which Incorporated Previous Federal Efforts

As we have previously discussed, in November 2009, an executive order  established the FFETF to strengthen the efforts of DOJ in conjunction  with federal, state, and local agencies to investigate and prosecute  significant financial crimes and violations relating to the current financial  crisis and economic recovery efforts. Other Major Federal, Private, and Nonprofit Coordinated Efforts Focus on Consumer Education and Information Gathering

In addition to the FFETF, there are other coordinated efforts involving  federal, state, private, and nonprofit entities aimed at addressing the  problem of foreclosure rescue schemes through activities intended to  enhance consumer outreach and education. Several Factors Co Affect the Federal Government’s Suc and the Working Group’s Efforts Be Limited by Weakness Planning

		Several Key Factors May Affect the Federal Government’s Likelihood of Success in Combating Foreclosure Rescue and Loan Modification Schemes

Our analysis of interviews with representatives of federal and state  agencies and nonprofit organizations suggests that several factors may  affect the federal government’s likelihood of success in combating  foreclosure rescue schemes. Consequently, the  plan does not include strategies or performance measures that relate to  foreclosure rescue and loan modification schemes. In addition, the group may be  limited in its ability to develop performance measures related to these  particular schemes. The action plan also, in part, addresses two  of the key factors that we identified as important to federal efforts in  combating foreclosure rescue and loan modification schemes—educating  consumers about deceptive practices and effectively coordinating law  enforcement efforts to combat these schemes. However, the action plan does not address key practices that can  help enhance and sustain collaboration among federal agencies, such as  the need for a clear, long-term strategy; clear delineation of roles and  responsibilities; and results-oriented performance measures. In addition, the working group’s action plan does not  specify strategies for foreclosure rescue and loan modification schemes,  and the distinctive nature of these schemes suggests that they warrant a  specific approach, particularly in identifying ways for supporting state- level law enforcement efforts. Recommendations for Executive Action

To develop a comprehensive strategy for the FFETF’s Mortgage Fraud  Working Group’s efforts to combat mortgage fraud, we recommend that  the U.S. Attorney General, as the head of the FFETF, do the following:   (1) develop clear, long-term strategies and performance measures that the  working group can use to evaluate its progress toward achieving its long- term goal of increasing enforcement in the area of mortgage fraud and   (2) to the extent that the working group considers foreclosure rescue  schemes to be a priority, develop strategies specific to these schemes,  including those that enhance coordination of law enforcement agencies  and that provide consumer education. Appendix I: Objectives, Scope, and Methodology

To determine what is known about the nature and prevalence of mortgage  foreclosure rescue and loan modification schemes, we collected available  data from and interviewed representatives of the four federal agencies— the Federal Trade Commission (FTC) and the Departments of Justice  (DOJ), the Treasury (Treasury), and Housing and Urban Development  (HUD)—and their relevant bureaus or divisions that were identified as  members of a multiagency initiative to combat these schemes as  announced by the administration on April 6, 2009.
Why GAO Did This Study

One of the most devastating aspects of the current financial crisis for homeowners is the prospect of losing their homes to foreclosure, and many homeowners have fallen victim to foreclosure rescue and loan modification schemes. In 2009, the administration created the Financial Fraud Enforcement Task Force (FFETF), which is led by the Department of Justice (DOJ), to combat these and other financial crimes. This report examines (1) the nature and prevalence of these schemes, (2) federal efforts coordinated to combat these schemes and other major efforts, and (3) factors that may affect federal efforts' success in combating these schemes. To address these objectives, GAO obtained information from federal agencies participating in the FFETF and interviewed representatives of five states with high exposure to potential foreclosures and nonprofit organizations undertaking related activities.

What GAO Found

Although data that would establish the prevalence of foreclosure rescue and loan modification schemes are limited, officials told GAO that these schemes can take several forms--the most active scheme is one in which individuals or companies charge a fee for services not rendered. Agency and nonprofit officials said that the perpetrators of these schemes are likely to be former mortgage industry employees, professional scam artists, and unethical attorneys and that the range of potential victims is wide. Law enforcement officials said that the nature of the schemes makes them difficult to combat because they can easily be conducted by Internet or across state lines. While law enforcement agencies and nonprofits have information, such as research studies and consumer complaints, that supports their belief that these schemes are widespread, there are no nationwide data that can reliably be used to describe their prevalence. Collaborative federal law enforcement efforts and other coordinated efforts involving federal and private organizations are under way to combat foreclosure rescue and loan modification schemes. The FFETF was established in November 2009 to strengthen the efforts of federal, state, and local agencies to investigate and prosecute a variety of financial crimes, including foreclosure rescue and loan modification schemes. Prior to the FFETF, the administration announced a multiagency effort to combat these schemes in April 2009, for which agencies, notably the Financial Crimes Enforcement Network and the Federal Trade Commission, took supporting actions. The FFETF's Mortgage Fraud Working Group, which has primary responsibility for coordinating activities related to these schemes, has focused on facilitating communication and exchanging information among law enforcement agencies by sponsoring training sessions and conferences. In addition to the FFETF, there are other major coordinated efforts aimed at combating these schemes, such as a public-private effort that focuses primarily on consumer education and outreach. Several factors may affect federal efforts to combat foreclosure rescue and loan modification schemes, and lack of a clear, long-term strategy could limit the FFETF's effectiveness. Key factors affecting federal success in combating these schemes include educating consumers about them and coordinating federal and state law enforcement efforts. The Mortgage Fraud Working Group has created an action plan that partly addresses these factors but does not fully incorporate certain key practices to enhance and sustain interagency collaboration. In particular, the plan largely focuses on short-term strategies, does not clearly identify members' roles and responsibilities, and does not clearly identify performance indicators that would allow it to measure progress over time. In addition, the plan outlines strategies for addressing mortgage fraud as a whole and identifies few specific approaches to combating foreclosure schemes. Without long-term strategies and performance measures specific to foreclosure schemes, the working group may be limited in its ability to combat these schemes.

What GAO Recommends

GAO is recommending that the U.S. Attorney General direct DOJ to develop clear, long-term strategies and performance measures that DOJ can use to evaluate its progress toward combating mortgage fraud, and consider developing strategies specific to foreclosure rescue schemes. DOJ concurred with these recommendations.