Mortgage predators

Philadelphia Inquirer: Many of the same sleazy operators who helped fuel the real estate bubble through dubious subprime lending practices are now taking advantage of homeowners through “foreclosure-rescue” scams.

In the wake of the housing collapse, an estimated 8 million homes face foreclosure over the next few years. That provides a ready market for such loan-modification scams.

Under the scheme, unscrupulous brokers offer to negotiate a loan modification for homeowners having trouble paying their mortgage.

The brokers charge an up-front fee of several thousand dollars. But they fail to ever reduce the loan; or worse, they stick the borrower with a more costly loan or trick him or her into a sale/leaseback of the house.

Targeting homeowners

Brokers target homeowners through e-mail, direct mail and boiler-room-style telemarketing.

The growth in foreclosure-rescue scams are the direct result of the failure of the lenders to work with homeowners. Scared, frustrated and unsophisticated borrowers then turn to the foreclosure-rescue brokers for help.

Federal and state authorities have intensified efforts to combat the schemes and increase awareness. Collectively, state attorneys general have filed at least 150 lawsuits and investigated 500 firms.

The National Consumer Law Center has urged Congress to ban up-front payments and allow for fees only if the broker is successful in modifying the loan.