California accounts for nearly 25 percent of suspected foreclosure rescue scams reported to national hotline
Scam Activity Is Statewide with No Heavy Concentration in One Region;Half the Victims are African-Americans, Hispanics, and Asians
MINNEAPOLIS, MAY 25, 2011 – California accounted for nearly one quarter of the calls by homeowners who believe they have been victimized by a foreclosure rescue scam, according to statistics released today by the Homeownership Preservation Foundation (HPF), an independent, national non-profit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure.
Since February of last year, HPF has operated a specialty unit of their Homeowner’s HOPE™ Hotline (888-995-HOPE), a resource for financially distressed homeowners. The unit focuses on those who believe they have been victimized by a scam or have been approached by someone offering related services they suspect are fraudulent. Some 22 percent of the calls came from California, far and away dwarfing activity reported in Florida, which ranked second and accounted for seven percent of the calls. Texas and New York ranked third with five percent, followed by Georgia with four percent.
Interestingly, while California’s reported fraudulent activity was significantly higher than other states, only one city from the Golden State ranked in the top five, indicating that purported scam activity isn’t concentrated in any one area. Miami ranked highest among cities for reported scams, followed by Los Angeles, Las Vegas, Houston, and Chicago.
“Although California was among the states most hard hit by the housing crisis, the reported foreclosure rescue scam activity seems disproportionately higher than we would have expected,” said Colleen Hernandez, HPF’s CEO. “It’s also surprising that the scam activity is so widely dispersed rather than concentrated in areas or regions with the highest foreclosure rates.”
Ms. Hernandez said HPF also noted that virtually half of the calls fielded since the hotline was launched were from homeowners who voluntarily identified themselves as African-American, Hispanic, or Asian.
“Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Colleen Hernandez, HPF’s CEO.
The Federal Trade Commission in February issued a rule prohibiting the payment of any upfront fees to negotiate mortgage reduction payments on behalf of a homeowner. Nevertheless, an untold number of companies and individuals continue to openly and flagrantly violate the rule, asking on average for an upfront fee of $2,589.58 to modify a mortgage. In virtually all instances, either no mortgage reduction was achieved or no work was actually performed.
Further complicating the situation, Ms. Hernandez noted that the FY 2011 budget recently enacted completely removes federal funding for housing counseling, originally funded at $88 million. This development will invariably lead to a dramatic surge in mortgage scams as counseling has proven to be a major deterrent to foreclosure rescue scams.
“Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners,” Ms. Hernandez said. “Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered.”
Ms. Hernandez says that companies demanding upfront fees to renegotiate mortgages are often run by individuals who were responsible for facilitating highly dubious mortgage loans during the housing bubble. “They profited on the front end and now they are seeking to cash in on the back end,” she said.
About the Homeownership Preservation Foundation
The Homeownership Preservation Foundation (HPF) is an independent national nonprofit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure. HPF guides consumers onto the path of sustainable homeownership and develops innovative solutions to preserve and expand homeownership. Through its Homeowner’s HOPE™ Hotline, 888-995-HOPE™, HPF provides comprehensive financial education and confidential foreclosure prevention counseling for FREE, 24 hours a day, 7 days a week, 365 days a year, in over 170 languages. Since 2007, HPF has served more than four million distressed homeowners, an average of 5,500 each weekday, who depend upon HPF as a trusted, neutral source of information and assistance. For more information about the Homeownership Preservation Foundation or the Homeowner’s HOPE™ Hotline, please visit www.995hope.org
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