Foreclosure Frauds and Scams

Executive Summary

Nearly one year ago, the State Foreclosure Prevention Working Group met with the 20  largest servicers of subprime mortgage loans to discuss opportunities to prevent unnecessary foreclosures. Over the past year, the State Working Group, composed of  state attorneys general and state banking regulators, has collected data monthly from 13 of these 20 servicers and published two reports on subprime servicing performance. While some progress has been made in preventing foreclosures, the empirical evidence is profoundly disappointing. Too many homeowners face foreclosure without receiving any meaningful assistance by their mortgage servicer, a reality that is growing worse rather than better, as the number of delinquent loans, prime and subprime, increases.

Our report shows servicers have increased their use of loan modifications as a tool to avoid foreclosure, but in recent months the number of loans on track for a loan modification has declined precipitously, while the use of short sales has increased. Servicers appear to have reached the “low hanging fruit” of subprime loans facing interest rate resets, while not developing effective approaches to address the bulk of subprime loans which are in default before interest rate resets. The mortgage industry’s failure to develop systematic approaches to prevent foreclosures has only spurred declines in property values and further increased expected losses on mortgage loan portfolios. Based on the rising numbers of delinquent prime loans and projected numbers of payment option ARM loans facing reset over the next two years, we fear that continued reactive approaches will lead to another wave of unnecessary and preventable foreclosures.

The Foreclosure Fraud Alert Website http://www.foreclosurefraudalert.com/

The Foreclosure Fraud Alert Blog  http://www.foreclosurefraudalert.com/fraudblog

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