Foreclosure Frauds and Scams

Florida Fraud News and Articles

Plan urged to halt foreclosure scams

Advocates for victims of foreclosure prevention scams are turning to Florida's attorney general for help.

BY MATTHEW HAGGMAN

mhaggman@MiamiHerald.com

A Broward legal aid organization is urging Florida Attorney General Bill McCollum to adopt emergency measures to curb foreclosure prevention scams, arguing the fraud has reached epidemic proportions and shows no sign of slowing down.

Legal Aid Service of Broward County asked Florida's attorney general last week to enact regulations similar to the plan Massachusetts Attorney General Martha Coakley instituted in her state in June.

Coakley did not wait for legislative action but claimed authority under that state's existing laws to issue regulations aimed at ending home-rescue frauds. The Broward group similarly wants swift legal action and says McCollum has the authority to do it under Florida's Deceptive and Unfair Trade Practices law or through an executive order from the governor.

The group also seeks reform by Florida legislators.

''Whenever citizens of Florida are in a position of being threatened we rely on the AG to take steps,'' said George Castrataro, an attorney at the Broward legal aid office. ``This is a stop-gap measure until new laws are enacted by the Legislature, but we hope he takes it.''

On Wednesday attorney general spokeswoman Sandi Copes didn't address whether McCollum has authority to take immediate action, but said the office is reviewing the proposal.

''We are already working to determine what fixes, if any, we could propose to address the mortgage fraud situation throughout the state,'' she said.

The attorney general's office is currently investigating two South Florida foreclosure prevention companies, National Foreclosure Management and American Home Rescue, which are suspected of fraud.

Home-saver fraud schemes, also called equity stripping, prey on distressed homeowners by promising to save them from foreclosure but instead strip out their home equity through excessive and unusual fees. Relieved homeowners often don't understand the fees until it's too late.

The fraud is particularly prevalent now because so many homeowners have significant home equity built up from the housing boom yet are now struggling to pay bigger and riskier mortgages than they can handle.

The Massachusetts plan makes for-profit foreclosure prevention illegal and limits the marketing of any foreclosure prevention plans. Many homeowners are flooded with mailers advertising home-saver programs immediately after banks move to foreclose and their names and address are published in court records.

Lauren Saunders, managing attorney at the National Consumer Law Center in Washington, encouraged McCollum to adopt Massachusetts' plan, saying she is trying to get the federal government to do the same.

Saunders said there is no good version of for-profit foreclosure prevention firms. ''The regulation we recommend is banning them,'' she said.

Attention:  State laws can change frequently.  Make sure you check for updates with your state or professional legal counsel.