The U.S. Department of Justice, Department of Housing and Urban Development (HUD), and Federal Trade Commission (FTC) recently announced the results of the Distressed Homeowner Initiative, designed as the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners. The yearlong initiative, launched by the FBI, a co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, resulted in 530 criminal defendants being charged, including 172 executives, in 285 federal criminal indictments or informations filed in U.S. District Courts across the country. These cases involved more than 73,000 homeowner victims and total losses by those victims estimated by law enforcement at more than $1 billion.
From 1 October 2011 to 30 September 2012 (fiscal year 2012), the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments. Typically, the con artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage or transferring title in the home to persons in league with the scammer. In the end, the homeowner can lose everything. Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after falsely promises that they would negotiate more favorable mortgage terms on behalf of the homeowners.
As a part of the Justice Department’s efforts to improve the lives of struggling homeowners, the Financial Fraud Enforcement Task Force’s Victims’ Rights Committee, in partnership with the Certified Financial Planning Board and the Foundation for Financial Planning, plan to begin offering pro-bono financial planning assistance to the victims of a foreclosure rescue scheme, whose alleged perpetrators were indicted by the U.S. Attorney’s Office for the Central District of California. All 4,000 victims of the scheme, many of whom lost their homes as a result of the fraud, have been invited to attend a free financial planning workshop in Riverside, California. The workshop is being designed to offer free financial information and education to assist the victims in recovering from the effects the crime had on their lives and to help them plan for the future (including addressing issues such as tax planning, debt management, foreclosure assistance, job loss, retirement planning, investment advice, insurance, employee benefits).
In order to protect struggling homeowners and increase the number of criminal enforcement actions made as part of this initiative, the members of the Mortgage Fraud Working Group have strived to be proactive. The FBI generated new investigations by gathering victim complaint data from FTC databases and other sources, analyzing the data, and distributing information of lead value to field offices from coast-to-coast. The FBI, together with the HUD Office of Inspector General, also utilized sophisticated undercover operations to facilitate the development of federal distressed homeowner criminal cases. In addition, the FBI led a surge consisting of several law enforcement agencies in southern California, where many foreclosure rescue scam operators are located, to develop investigations that could be prosecuted in various federal districts. Many of the investigations initiated as part of the Distressed Homeowner Initiative are ongoing and may result in additional enforcement actions in the near future.
For additional information related to the Distressed Homeowner Initiative, please visit:
FBI: Distressed Homeowner Initiative
Background information:
U.S. Financial Fraud Enforcement Task Force
U.S. Department of Housing and Urban Development: Office of Inspector General
Federal Housing Finance Agency: Office of Inspector General
U.S. Department of the Treasury: Financial Crimes Enforcement Network
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