Snappy newsletters. Simple Facebook sharing. Spirited comments. Sweet features are waiting… GET THEM NOW!

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

(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.

[Images (2)]

[Quotes (1)]

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)

A foreclosure sign stands outside an existing home in Denver. A record 9 percent of American homeowners were either behind on their payments or in foreclosure at the end of June. (AP Photo/David Zalubowski, file)

« Prev« Prev | Next »Next » Slideshow

There is a booming business in selling information on foreclosures. There are whole companies that do that and little else. That gives you an idea how big this is. - Melissa Huelsman, a lawyer, on the extent of the predatory lending problem

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

$26B Mortgage Settlement a 'Modest' Help: Experts

Many struggling homeowners not covered in deal

(NEWSER) - The $26 billion mortgage settlement announced yesterday will be a boon for some—but the terms of the deal leave many homeowners out in the cold. Recipients of loans owned by the Federal Housing Administration, for instance, won't directly benefit from the settlement; nor will those with mortgages held by private investors, the New York Times reports. Millions of Fannie Mae and Freddie Mac loans—about half of America's mortgages—aren't part of the plan, either. More»

Rubble Raisers: Banks Demolishing Scores of Homes

Communities urge demolition and land donation to reuse property

(NEWSER) - The economic crunch is sprouting vacant lots across the nation—and some communities think that's a good thing. Banks, encouraged by government officials, are changing the US landscape by bulldozing scores of foreclosed homes—at a cost of some $7,500 a pop—and donating the cleared land to communities, reports the Washington Post . Banks have found it's cheaper to raze homes and give away the property rather than continue to pay upkeep and property taxes. Current and pending laws in Cleveland, New York, Philadelphia, and Georgia are setting up "land bank" systems urging demolition of homes in the hope of reusing the lots, if only for a parking lot or community garden. More»

Detroit Woman, 101, Evicted From Home of 58 Years

Texana Hollis' son admits he stopped making payments

(NEWSER) - A particularly sad foreclosure story out of Detroit: Texana Hollis has been evicted from her home of the past 58 years ... at the age of 101. As if that's not depressing enough, Hollis and her late husband owned the home outright—but in 2003, Hollis' son persuaded her to sign it over to a reverse-mortgage company for $32,000. That money was supposed to help make home repairs, but Warren Hollis also bought a car and $5,000 worth of other things, WXYZ reports. Hollis was evicted after her 65-year-old son failed to pay property taxes to maintain the mortgage, the AP adds. ( Update: HUD officials are giving Hollis her house back .) More»

Ruth Madoff Dumping Bernie

She finally cuts it off after 52 years to reconcile with surviving son

(NEWSER) - After 52 years of marriage, Bernard Madoff's wife is finally calling it quits. Ruth Madoff, 70, hasn't seen her 73-year-old hubby for more than 8 months, reports the Daily Mail. She's cutting ties with Madoff in an effort to reconcile with her remaining son, Andrew, and her late son's family, say sources. Son Mark committed suicide late last year on the second anniversary of his dad's arrest for massive fraud, and Ruth was turned away from his memorial by his distraught widow. More»

Audits: Top Mortgage Firms Defrauded Taxpayers

Confidential reports could lead to prosecutions

(NEWSER) - A set of confidential audits could lead to fraud prosecutions for five of America’s biggest mortgage lenders, officials briefed on the documents tell the Huffington Post . The scathing documents accuse Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial of defrauding taxpayers by making false claims about foreclosures on homes purchased with government-backed loans, according to the officials. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

As Foreclosures Rise, Fraud Cases Balloon