As Foreclosures Rise, Fraud Cases Balloon

Equity scammers take advantage of ignorant, desperate owners
By Katherine Thompson,  Newser Staff
Posted Sep 22, 2008 1:03 PM CDT
McGregor Scott, United States Attorney for the Eastern District of California, gestures as he discusses the indictment of 19 people allegedly involved in a mortgage fraud scam.   (AP Photo/Rich Pedroncelli)
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(Newser) – Running parallel with spiking foreclosure rates, so-called “foreclosure rescue scams” have reached epic proportions, and many state and local agencies aren't equipped to fight back, MSNBC reports. Companies that promise to help floundering property owners keep their homes and avoid the stigma of foreclosure are instead milking them for tens of thousands of dollars, and further damaging their credit scores.

"It was a niche market that exploded," one lawyer says of equity strippers. Since many Americans don't know the true value of their homes, and fewer still understand the intricacies of equity and mortgage fine print, unscrupulous companies have had little trouble capitalizing on the market. In Florida, 10,000 convicted felons were granted mortgage broker licenses between 2001 and 2007.