Advocate Warns of Possible Spike in Foreclosure Rescue Scams

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Editor's Note: Reports this week note that foreclosures made up roughly a third of all home sales last spring. NPR quotes from foreclosure listing firm Realty Trac that “foreclosure sales… accounted for 31 percent of the market in the April-June quarter.” Bay Area housing advocate Maeve Elise Brown points to projections by federal officials of 3 million more foreclosures nationally this year, also warning of a spike in foreclosure rescue scams. Such scams, she says, may result from the proposed $88 million cut from the Department of Housing and Urban Development’s [HUD] budget -- including its funding for foreclosure services -- which is scheduled to take effect in October.

Brown, director of Housing and Economic Rights Advocates [HERA] based in Oakland, previously shared critical insights for NAM’s “Faces of Foreclosure”  multimedia series. She recently sat down with NAM news anchor Odette Keeley to talk about what her organization is seeing on the ground among troubled homeowners, including communities of color in the San Francisco Bay Area.

Tell us about your work with HERA and what your organization is focused on right now when it comes to foreclosures.

Brown: We are a non-profit law office, so we’re a little unusual, we’re the only non-profit law office in California that focuses on predatory mortgage lending, rescue scams and mortgage servicing problems. And because we are statewide and we get calls from homeowners in distress all over the state, we are able to have a sort of ongoing information gathering position. We not only share information but we also learn a lot from our clients. So, our real focus is to make sure that people get to keep their home.

What are you and your staff seeing on the ground among homeowners affected by foreclosure? What are the cases or stories that have struck you the most?

Brown: There are so many people who are suffering, it’s hard to pick out some of the most outstanding stories, but one of the themes that immediately comes to mind is how badly seniors are being harmed in the crisis. One consistent theme has been that seniors were put into loans that were much bigger that what they could afford, [at a] much higher price than they could afford.
One client who comes to mind is an African-American widow from Oakland, and when she came to us she was facing foreclosure. We had to quickly unwind what happened because she found it all very confusing. What we learnt was that this woman, who owned her home for over 30 years, was trying to borrow a very small amount of money to bury her son who had met an untimely death, and a little bit for home repair - that’s it. She only owed about $ 90,000 on her home when she came to us. She only made $900/month from Social Security. She was put instead into a loan for $160,000 with an outrageous interest and a lot of fees stripped from equity. So, she refinanced out of the $90,000 into a new, very pricy loan, and the brokers and the company stripped a lot of fees out in the process. It was with a different servicer, a different company from the entity that was held on to $90, 000. It was a setup for her to lose the home. I wish I could say that was an unusual story but it’s not.
We were able to gather all the documents to confirm what we suspected happened, we brought in private, outside counsel to assist us in bringing suit, and we were able to settle in a very positive way so she can keep her home – that gigantic loan was removed, and she also received some money for the harm that she had suffered.

Is your group, HERA seeing directly the disproportionate impact of the foreclosure crisis on communities of color?

The majority of our clients are people of color as well as immigrants. For example in Napa County, 65 maybe 70% clients whom we serve are immigrants. Same story out of Contra Costa County, maybe something like 60% immigrants. Solano county, rather similar story, but it’s very consistent. And in some communities, you see predominantly Latino immigrants who were hammered by abusive practices and are still being taken advantage of. In Solano County, we have the Filipino community that’s been particularly devastated, not only by bad loans at the front end, but by false promises of assistance at the back end when they’re trying to get their loans modified. Vallejo has been really devastated, Fairfield has its fair share but it’s the Filipino community in Vallejo that really stands out.
In Fairfield, I would say there’s more the Latino community, with some Filipinos mixed in. But I don’t think enough attention is paid to the Asian and Pacific Islander community. Sometimes there is maybe a false notion that their community has not been hit terribly hard by the foreclosure crisis, but it’s just not true. California is a very diverse community, and there’s a tremendous amount of discriminatory targeting of high-cost products, high-cost loans, and now, foreclosure rescue scams towards communities of color. You know federal officials projected that we might have about 3 million foreclosures nationally, again just for the year of 2011, and the crisis is expected to continue at least through 2015.

What are these foreclosure rescue scams? Are they increasing in number?

The scams are increasing in number, and California is ground zero for a tremendous numbers of scams. Some of the scammers are based in California, some are based in Florida, Nevada and other states. But what is consistent is that they prey on people’s fear of losing their home, they prey on the fact that people are being jerked around by mortgage servicers, and are feeling desperate.
Recent reports cite that because of federal budget deficit cuts, $88M was cut from the Department of Housing & Urban Development’s [HUD] budget, including its funding for foreclosure services. What programs will suffer the most and what will be the biggest impact to troubled homeowners?
This latest proposed cut is going to affect homeowners in a devastating fashion. What is on the table is basically the de-funding of HUD-certified housing counseling agencies, and those agencies are some of the frontline, they’re free assistance for homeowners, free, reputable trained assistants to try to help homeowners get loan modifications, to help them assess whether or not they even really should or can hang on to their home. With the anticipated loss of housing counseling agencies, homeowners are going to be driven even further into the arms of rescue scammers. That’s our greatest fear.
I have seen the estimates of anywhere from about 22% to 33% of homeowners who were counseled or advocated for by housing council agencies managing to hang on their home. And that might not sound as high as one wants to hear, but the fact is, it’s a real uphill battle to deal with mortgage servicers. They don’t generally seem to want to help people. There are several hundred housing counseling agencies certified by HUD in California alone. When the housing counselors are not there to help, I can’t imagine what the load of homeowners seeking help is going to be like.

Are housing counseling agencies and foreclosure advocacy groups trying to lobby against these HUD budget cuts?

Yes, they are. Housing counselors, legal services organizations like mine, I believe even local government has stepped up, and has been trying to lobby Congress trying to get them to understand the bigger nightmare they are about to create. I know that groups are also try to brainstorm how to protect homeowners in the face of what might happen because it’s just unacceptable to leave homeowners to the clutches of disreputable lawyers, realtors --people out there who are hungry for money and making false promises about helping people keep their home.

What is your group and fellow-advocates asking state lawmakers to do to help alleviate both the financial and emotional toll of foreclosures on Californians?

One of the things we’re asking state lawmakers to do is to make sure that servicers stop driving homeowners towards foreclosure, while at the same time telling them that they are working on a loan modification. That’s referred to as dual tracking, because you have people operating on two separate paths at the same time: one department that’s forcing you towards the foreclosure sale, and another department that says, “Oh don’t worry, we’re trying to work with you, and we’re working on loan modification. It’s literally driving Californians into bad health from the stress and the frustration. And although the Federal Reserve Board has issued a consent order, declaring that dual tracking should not happen, must not happen, it’s still happening. So one of the things that legislators need to do is to make servicers step up and deal in a good faith with the public. Some of the legislators are quite resistant to taking any steps necessary to protect the public. We thank the handful of legislators who are interested in protecting their constituencies, but we are really kind of shocked by how many are not.

Odette Keeley is host and executive producer of “New America Now”, NAM’s TV show, as well as anchor for NAM segments on “Upside” - both airing on COMCAST Hometown Network - CHN 104 & COMCAST ON DEMAND. Josue Rojas and Valerie Klinker are video producers for NAM. Aytakin Aliyeva is an intern for NAM and assisted with the transcription of this interview.

Photo Credits:

Housing and Economic Rights Advocates [ HERA ]

Joseph Rodriguez