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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

October 2013: 

Financial Crime: 

Foreclosure Rescue Schemes Have Become More Complex, and Efforts to 
Combat Them Continue: 

GAO-14-17: 

GAO Highlights: 

Highlights of GAO-14-17, a report to congressional committees. 

Why GAO Did This Study: 

In July 2010, GAO reported on federal efforts to combat foreclosure 
rescue schemes-—schemes that promise but do not deliver foreclosure 
prevention assistance. Subsequently, the Dodd-Frank Wall Street Reform 
and Consumer Protection Act required GAO to study interagency efforts 
to crack down on these schemes. This report updates GAO’s 2010 report 
and examines (1) available information about the prevalence and nature 
of foreclosure rescue schemes, and (2) the status and scope of the 
federal government’s multiagency effort and other major initiatives to 
combat them. 

To address these objectives, GAO analyzed consumer complaints, 
obtained information from federal agencies participating in FFETF, and 
interviewed representatives of six states with high populations of 
borrowers at risk of foreclosure, and nonprofit organizations that are 
also making efforts to combat these schemes. 

In its written comments, Treasury noted that it valued GAO’s insights 
as it continues to combat foreclosure rescue schemes. The Special 
Inspector General for the Troubled Asset Relief Program concurred with 
the findings related to its work and noted that it has made 
significant progress in combating these schemes and will continue to 
work with law enforcement partners to investigate them. 

What GAO Found: 

Foreclosure rescue schemes remain at historically high levels and have 
become more complex. The Federal Trade Commission’s (FTC) Consumer 
Sentinel Network-—an online database of consumer complaints received 
by FTC, law enforcement agencies, and other organizations—-showed that 
complaints about these schemes rose from around 9,000 in 2009 to more 
than 18,000 each year in 2010, 2011, and 2012. In addition, the 
Financial Crimes Enforcement Network reported steady increases over 
the same period in the number of Suspicious Activity Reports (SAR)—
reports filed by financial institutions about suspected violations of 
financial laws and regulations—related to these schemes. Agency 
officials and representatives of nonprofits told GAO that the schemes 
had become increasingly complex, creating challenges for law 
enforcement. For example, schemes involving attorneys—which tend to 
involve greater losses—had become more common in recent years 
following a regulation that bans upfront fees, but provides an 
exception for attorneys. These schemes present unique challenges 
because attorneys typically collect fees upfront and enforcement 
officials have difficulty trying to determine whether attorneys are 
providing legitimate services. Furthermore, officials and 
representatives of nonprofits also noted that some populations, 
including minorities and the elderly, continued to be targeted. 

Since GAO last reported on this issue in 2010, the Financial Fraud 
Enforcement Task Force (FFETF) and its members have undertaken a 
number of actions to educate borrowers on how to avoid being 
victimized by these schemes. These efforts have also emphasized the 
need for consumers and institutions to report possible fraudulent 
schemes and the importance of enhanced information sharing among law 
enforcement agencies investigating and prosecuting these schemes. 
Specifically, FFETF members have developed and participated in various 
outreach efforts, including hosting regional education summits for 
distressed homeowners, counselors, and law enforcement officials and 
directing more individuals to resources on FFETF’s mortgage fraud 
webpage, StopFraud.gov. FFETF member agencies’ fraud detection efforts 
have focused on gathering information from SARs and complaints from 
the FTC Consumer Sentinel Network and sharing this information among 
members. Member agencies that GAO contacted also indicated that 
information sharing and coordination on investigations among FFETF 
members had led to joint investigations and broad enforcement 
initiatives. For example, one year-long multiagency effort resulted in 
criminal charges against 107 defendants. Cases were also filed against 
128 civil defendants in federal courts across the country. 

View [hyperlink, http://www.gao.gov/products/GAO-14-17]. For more 
information, contact Lawrance L. Evans, Jr. at (202) 512-8678 or 
evansl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Foreclosure Rescue Schemes Remain at High Levels and Have Become More 
Complex: 

FFETF Members Have Focused on Prevention, Detection, and Enforcement 
to Combat Foreclosure Rescue Schemes: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of the Treasury: 

Appendix III: Comments from the Special Inspector General for the 
Troubled Asset Relief Program: 

Appendix IVGAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Selected Federal Agencies Involved in Combating Foreclosure 
Rescue Schemes: 

Figures: 

Figure 1: Number of Home Loan Payments More Than 60 Days Past Due, as 
of March 31, 2013, by State: 

Figure 2: Complaints about Foreclosure Rescue Schemes in FTC's 
Consumer Sentinel Network, 2009-2012: 

Figure 3: Number of SARs Describing Foreclosure Rescue Schemes, 2009-
2012: 

Figure 4: Foreclosure Rescue Schemes Alleging Attorney Involvement, 
March 2010-February 2013: 

Figure 5: Timeline of Government Announcements and Number of 
Foreclosure Rescue Scheme Complaints Submitted to the HOPE Hotline: 

Abbreviations: 

ABA: American Bar Association: 

CFPB: Bureau of Consumer Financial Protection: 

DOJ: Department of Justice: 

FBI: Federal Bureau of Investigation: 

FFETF: Financial Fraud Enforcement Task Force: 

FHFA: Federal Housing Finance Administration: 

FinCEN: Financial Crimes Enforcement Network: 

FTC: Federal Trade Commission: 

HAMP: Home Affordable Modification Program: 

HUD: Department of Housing and Urban Development: 

IFR: Independent Foreclosure Review: 

IRR: Individual Rights and Responsibilities: 

LMSPN: Loan Modification Scam Prevention Network: 

MARS: Mortgage Assistance Relief Services: 

MFWG: Mortgage Fraud Working Group: 

SAR: Suspicious Activity Report: 

SIGTARP: Special Inspector General for the Troubled Asset Relief 
Program: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

October 29, 2013: 

Congressional Committees: 

From September 2008 through May 2013, about 4.4 million homes had been 
lost to foreclosure.[Footnote 1] In 2010, we reported on individuals 
and companies that had been perpetrating fraudulent foreclosure rescue 
schemes against homeowners who were at risk of losing their homes. 
[Footnote 2] These schemes, which can result in significant losses to 
individuals, promise to assist homeowners at risk of losing their 
homes to foreclosure through one of several actions but ultimately do 
not provide the promised relief. Homeowners have lost, and continue to 
lose, thousands of dollars on these schemes, when free help may be 
available from federal programs and private financial institutions. 

In November 2009, the President created the Financial Fraud 
Enforcement Task Force (FFETF), a multiagency effort to combat a range 
of financial crimes relating to the recent financial crisis and 
recovery efforts.[Footnote 3] To increase federal enforcement in areas 
of mortgage fraud and coordinate outreach, the task force established 
the Mortgage Fraud Working Group (MFWG). MFWG is co-chaired by the 
U.S. Attorney for the Eastern District of California, officials from 
the U.S. Department of Housing and Urban Development's (HUD) Office of 
Inspector General, officials from the U.S. Department of Justice (DOJ) 
Civil Division and Federal Bureau of Investigation (FBI), and 
representatives from the National Association of Attorneys General. In 
addition to the working group, other federal, state, local, private, 
and nonprofit entities have continued their efforts to combat 
foreclosure rescue schemes. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act required 
GAO to study current multiagency efforts to combat foreclosure rescue 
schemes.[Footnote 4] In response, we examined (1) the available 
information about the nature and prevalence of foreclosure rescue 
schemes and (2) the status and scope of the federal government's 
multiagency efforts to combat these schemes and other major efforts. 
This report updates our 2010 report on foreclosure rescue schemes. 
[Footnote 5] 

To determine what is known about the nature and prevalence of mortgage 
foreclosure rescue schemes, we collected complaint data from the 
Federal Trade Commission's (FTC) Consumer Sentinel Network database 
and the Loan Modification Scam Prevention Network (LMSPN).[Footnote 6] 
In addition, we examined published information on the number of 
Suspicious Activity Reports (SARs) related to foreclosure rescue 
schemes.[Footnote 7] We spoke with officials and representatives who 
manage these databases about their data collection processes and 
internal quality controls and tested the data where applicable. We 
found FTC's Consumer Sentinel Network, LMSPN, and SAR data to be 
sufficiently reliable for the purpose of discussing the nature and 
prevalence of foreclosure rescue schemes in this report. We contacted 
representatives of agencies that are part of MFWG that were active in 
combating foreclosure rescue schemes--the Bureau of Consumer Financial 
Protection (CFPB), DOJ, the Federal Housing Finance Agency (FHFA) and 
its Office of Inspector General, FTC, HUD and its Office of Inspector 
General, U.S. Department of the Treasury (Treasury), the Office of the 
Special Inspector General for the Troubled Asset Relief Program 
(SIGTARP), and the U.S. Postal Inspection Service. In addition, we 
contacted representatives of government-sponsored enterprises 
(enterprises), Fannie Mae and Freddie Mac, as well as offices of the 
attorneys general from Indiana and the five states we spoke with for 
our 2010 report--Arizona, California, Florida, Illinois, and New York--
which have some of the highest numbers of potential foreclosures. We 
also spoke with a number of nonprofit organizations that are actively 
addressing these schemes. 

To determine the status and scope of the federal government's 
multiagency effort and other major efforts to combat these schemes, we 
interviewed officials and obtained relevant documentation from FFETF 
and the MFWG members listed previously. We also interviewed officials 
and obtained documents from the enterprises and nonprofit 
organizations that have undertaken major efforts in this area, 
including the National Fair Housing Alliance, the National Community 
Reinvestment Coalition, HOPE NOW, the Homeownership Preservation 
Foundation, and lead members of LMSPN, including the Lawyers' 
Committee for Civil Rights Under Law (Lawyers' Committee) and 
NeighborWorks America (NeighborWorks). We reviewed these entities' 
websites to determine what information was available on foreclosure 
rescue schemes and interviewed officials about their efforts to 
conduct outreach, collect consumer complaints, and conduct enforcement 
activities related to these types of schemes. To identify requirements 
for effective internal controls related to fraud detection and 
prevention, we reviewed Standards for Internal Control in the Federal 
Government.[Footnote 8] Additionally, we looked at our past reviews of 
federal programs in which we identified the key elements of a 
framework for fraud prevention, detection, and prosecution.[Footnote 
9] Finally, we collected information on the number of civil and 
criminal foreclosure rescue scheme cases state and federal agencies 
pursued. Appendix I contains detailed information on our scope and 
methodology. 

We conducted this performance audit from November 2012 to October 2013 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The recent foreclosure crisis has resulted in significant 
opportunities for individuals and companies to take advantage of 
homeowners who are at serious risk of losing their homes to 
foreclosure. In 2010, we reported that national default and 
foreclosure rates rose sharply from 2005 through 2009 to the highest 
level in 29 years. Since 2009, the rates of default and foreclosures 
have steadily declined. However, data from the Mortgage Bankers 
Association for the first quarter of 2013 show that the number of home 
loans potentially facing foreclosure--borrowers who were more than 60 
days past due--remains elevated, with nearly 1.6 million (4 percent) 
of home loans currently being serviced in the United States. As figure 
1 shows, California and Florida have the highest number of potential 
foreclosures, a statistic that has remained consistent since we 
reported in 2010. 

Figure 1: Number of Home Loan Payments More Than 60 Days Past Due, as 
of March 31, 2013, by State: 

[Refer to PDF for image: illustrated U.S. map] 

25,000 or less: 
Alaska: 1,583; 
Arkansas: 12,530; 
Colorado: 22,776; 
Connecticut: 20,564; 
Delaware: 7,627; 
District of Columbia: 4,134; 
Hawaii: 4,392; 
Idaho: 6,253; 
Iowa: 7,552; 
Kansas: 9,087; 
Kentucky: 14,605; 
Louisiana: 20,532; 
Maine: 4,881; 
Minnesota: 18,398; 
Mississippi: 14,434; 
Montana: 2,274; 
Nebraska: 5,587; 
New Hampshire: 6,038; 
New Mexico: 7,498; 
North Dakota: 591; 
Oklahoma: 12,291; 
Oregon: 15,586; 
Rhode Island: 6,091; 
South Carolina: 22,586; 
South Dakota: 1,096; 
Utah: 13,173; 
Vermont: 1,367; 
West Virginia: 4,302; 
Wisconsin: 17,810; 
Wyoming: 1,522. 

25,001 to 50,000: 
Alabama: 26,472; 
Arizona: 29,018; 
Indiana: 30,954; 
Massachusetts: 35,123; 
Michigan: 45,779; 
Missouri: 27,938; 
Nevada: 26,865; 
Tennessee: 36,894; 
Virginia: 43,491; 
Washington: 43,100. 

50,001 to 75,000: 
Georgia: 74,924; 
Illinois: 63,759; 
Maryland: 54,304; 
New Jersey: 63,184; 
North Carolina: 51,226; 
Ohio: 53,731; 
Pennsylvania: 63,801. 

75,001 to 100,000: 
New York: 87,589. 

100,001 or more: 
California: 189,601; 
Florida: 132,414; 
Texas: 104,073. 

Sources: GAO analysis of the Mortgage Bankers Association’s National 
Delinquency Survey data (first quarter, 2013); Map Resources (map). 

[End of figure] 

In response to the rising number of defaults and foreclosures, using 
authority granted through the Emergency Economic Stabilization Act of 
2008, the administration announced the Making Home Affordable Program 
in February 2009, which includes a number of programs, such as the 
Home Affordable Modification Program (HAMP), intended to assist 
homeowners facing potential foreclosure.[Footnote 10] Under HAMP, 
Treasury pays an incentive to servicers and investors for reducing the 
borrower's monthly mortgage payment. In addition to HAMP, other 
government and private programs are designed to provide assistance to 
homeowners facing foreclosure. For example, Fannie Mae and Freddie Mac 
have their own loan modification programs. Homeowners may also be able 
to refinance under the Home Affordable Refinance Program, a program 
that was created by FHFA to help homeowners who are current on their 
mortgages, but owe more than the value of their homes. The program is 
administered by the enterprises. Individual private financial 
institutions may offer their own proprietary loan modification 
programs for homeowners who do not qualify for HAMP. Free counseling 
services, such as those provided by HUD-certified counseling agencies, 
are available to homeowners seeking to avoid foreclosure and can be 
accessed through the Homeowner's HOPE Hotline (1-888-995-HOPE). The 
hotline is run by a nonprofit organization that works with a coalition 
of governmental agencies, financial services institutions, and other 
nonprofit groups to help homeowners struggling to make their monthly 
mortgage payments. However, desperate homeowners may be unaware of 
these free alternatives or may be steered away from free sources of 
assistance. 

Further, two major enforcement actions--the Independent Foreclosure 
Review (IFR) and the National Mortgage Settlement--were brought 
against leading mortgage servicers following reviews of their 
foreclosure processes. In 2011 and 2012, the Office of the Comptroller 
of the Currency and the Board of Governors of the Federal Reserve 
System (Federal Reserve) issued consent orders against 16 of the 
largest U.S. mortgage servicers.[Footnote 11] The consent orders 
required servicers to conduct foreclosure reviews to determine if 
borrowers suffered financial harm directly resulting from errors, 
misrepresentations, or other deficiencies that may have occurred 
during the foreclosure process. The mortgage servicers were required 
to retain independent consultants to review foreclosures that were 
initiated, pending, or completed during 2009 or 2010 and to provide 
payment to homeowners who suffered financial injury as a result of 
foreclosure processing errors. In 2013, regulators reached agreements 
with 15 of the 16 mortgage servicing companies subject to the 2011 and 
2012 consent orders to discontinue the foreclosure reviews and to 
provide over $3.9 billion in direct payments to eligible borrowers and 
approximately $5.7 billion in foreclosure prevention assistance. In 
February 2012, DOJ, Treasury, and HUD along with 49 state attorneys 
general reached an agreement with the five largest mortgage servicers 
on improper foreclosure practices. This agreement, known as the 
National Mortgage Settlement, resulted in approximately $25 billion in 
monetary sanctions and relief to distressed homeowners.[Footnote 12] 
One of the provisions in the settlement is for immediate aid to 
homeowners needing loan modifications through principal reduction, 
refinancing, or other forms of relief. The settlement requires the 
servicers to pay up to $17 billion in principal reduction and other 
forms of loan modification relief nationwide.[Footnote 13] 

A number of federal and state enforcement agencies perform different 
roles and use different legal authorities to combat foreclosure rescue 
schemes. Within the federal government, CFPB, FTC, SIGTARP, U.S. 
Postal Inspection Service, and agencies within DOJ, FHFA, HUD, and 
Treasury are members of MFWG and have key roles in investigating and 
prosecuting persons who have engaged in these types of schemes (see 
table 1). In addition to MFWG, some member agencies also participate 
in FFETF's Rescue Fraud Working Group, another multiagency working 
group focused on criminal and civil fraud enforcement related to the 
Troubled Asset Relief Program (TARP), including foreclosure rescue 
schemes. The Rescue Fraud Working Group is co-chaired by officials 
from SIGTARP, Treasury's Office of Financial Stability, and the Acting 
Assistant Attorney General for DOJ's Criminal Division. Fannie Mae and 
Freddie Mac play a role in educating consumers about schemes. On the 
state level, state attorneys general play key roles in prevention, 
detection, and enforcement of these schemes. 

Table 1: Selected Federal Agencies Involved in Combating Foreclosure 
Rescue Schemes: 

Agency: Bureau of Consumer Financial Protection; 
Primary role in combating foreclosure rescue schemes: Publishes 
mortgage fraud information on its website and collects, investigates, 
and works to resolve consumer complaints. Has civil enforcement 
authority. 

Agency: Department of Housing and Urban Development and the Office of 
Inspector General; 
Primary role in combating foreclosure rescue schemes: HUD funds the 
"Know it. Avoid it. Report it." public education campaign on 
foreclosure rescue schemes and sends officials to conduct outreach and 
collect complaints at public outreach events. Homeowners may also meet 
with HUD-approved counselors during these events. The Office of 
Inspector General investigates civil and criminal fraud related to HUD 
programs. 

Agency: DOJ Civil Division; 
Primary role in combating foreclosure rescue schemes: Prosecutes civil 
and criminal cases involving mortgage fraud and may share information 
with enforcement officials on local mortgage fraud working groups and 
task forces. 

Agency: DOJ U.S. Attorneys; 
Primary role in combating foreclosure rescue schemes: Have district-
level jurisdiction to prosecute civil and criminal cases of 
foreclosure rescue schemes. U.S. Attorneys participate and share 
information with local enforcement agencies in the local mortgage 
fraud working groups and task forces. 

Agency: DOJ U.S. Trustee Program; 
Primary role in combating foreclosure rescue schemes: Enforces 
bankruptcy law and investigates civil and criminal foreclosure rescue 
schemes involving bankruptcy. 

Agency: Federal Bureau of Investigation; 
Primary role in combating foreclosure rescue schemes: Investigates a 
range of criminal financial activities, including foreclosure rescue 
schemes. The Financial Institution Fraud Unit oversees FBI field 
office investigations that focus on fraud schemes that involve 
financial institutions, particularly in the areas of mortgage fraud 
and bank failures. 

Agency: Federal Housing Finance Agency and the Office of Inspector 
General; 
Primary role in combating foreclosure rescue schemes: Conducts 
outreach to federal agencies, industry partners, and consumers on 
mortgage fraud complaints received via its hotline and investigates 
fraud impacting the enterprises, as well as federal home loan banks. 

Agency: Federal Trade Commission; 
Primary role in combating foreclosure rescue schemes: Maintains 
Consumer Sentinel Network database. Has civil enforcement authority to 
investigate potentially deceptive and unfair practices and violations 
of its regulations involving foreclosure rescue schemes. Educates 
consumers and industry about these schemes. 

Agency: Treasury - Financial Crimes Enforcement Network; 
Primary role in combating foreclosure rescue schemes: Issues public 
financial advisories and guidance on schemes and collects and reviews 
Suspicious Activity Reports for potential foreclosure rescue schemes. 

Agency: Treasury - Office of Financial Stability; 
Primary role in combating foreclosure rescue schemes: Conducts daily 
website scans to identify and close foreclosure rescue scheme websites 
by issuing cease-and-desist letters. Conducts preliminary 
investigations into allegations of foreclosure rescue schemes related 
to TARP programs, which may result in referrals to SIGTARP and other 
appropriate law enforcement and regulatory authorities. 

Agency: Special Inspector General for the Troubled Asset Relief Program 
(SIGTARP); 
Primary role in combating foreclosure rescue schemes: Investigates a 
range of criminal financial activities related to TARP programs, 
including foreclosure rescue schemes, and distributes information 
alerts to at-risk homeowners and presents information on schemes at 
public events. 

Agency: U.S. Postal Inspection Service; 
Primary role in combating foreclosure rescue schemes: Enforces laws 
against mail fraud to protect consumers from the fraudulent use of the 
postal system. 

Source: GAO. 

[End of table] 

In December 2010, FTC issued the Mortgage Assistance Relief Services 
(MARS) rule, which includes two primary provisions: (1) a ban on 
advance fees for foreclosure rescue services; and (2) a requirement 
that companies inform consumers that a lender may refuse to modify 
their loan and that consumers can reject any terms negotiated with 
their lender.[Footnote 14] Attorneys are generally exempt from the 
rule if they meet three conditions: (1) they provide mortgage 
assistance relief services as part of their practice of law; (2) they 
are licensed in the state where the consumer or the consumer's 
dwelling is located; and (3) they are complying with state laws and 
regulations governing attorney conduct related to the rule.[Footnote 
15] To be exempt from the advance fee ban, attorneys must also meet 
two additional requirements: (1) they must place any funds they 
receive from a consumer in advance of performing legal services in a 
client trust account, and (2) they must abide by state laws and 
regulations covering such accounts.[Footnote 16] CFPB reissued the 
MARS rule without substantive modification in December 2011.[Footnote 
17] All of the states we spoke with reported having laws similar to 
the MARS rule.[Footnote 18] In addition, FTC reported that as of 2010, 
at least 30 states and the District of Columbia had enacted similar 
statutes or regulations.[Footnote 19] Except for California, all of 
the states we spoke with said they also had similar exemptions for 
attorneys. 

Foreclosure Rescue Schemes Remain at High Levels and Have Become More 
Complex: 

Since our report in 2010, data collected by federal agencies suggest 
that foreclosure rescue schemes have increased.[Footnote 20] 

Data on these schemes that federal agencies collect include consumer 
complaints and reports filed by financial institutions. These data 
show an increase each year from 2009 to 2011, and a slight decline in 
the number of complaints in 2012. However, the number of complaints 
through April 2013 suggests another increase for the year. Agency 
officials and others we contacted noted that foreclosure rescue 
schemes had become increasingly complex since 2010--involving 
attorneys and the bankruptcy code, among other things. In particular, 
schemes involving attorneys appear to have increased recently, 
presenting challenges to law enforcement. 

Consumer Complaints and Suspicious Activity Reports about Foreclosure 
Rescue Schemes Increased after 2009: 

Consumer Complaints Reported by FTC and Lawyers' Committee: 

FTC's Consumer Sentinel Network, an online database available to law 
enforcement agencies, compiles consumer complaints received by FTC and 
law enforcement and other organizations, including other federal and 
state agencies and nonprofit organizations.[Footnote 21] As shown in 
figure 2, consumers filed almost 9,000 mortgage modification/ 
foreclosure relief complaints in 2009 to the entities reporting into 
the network, but more than 20,000 complaints in 2011. The number of 
these complaints fell slightly in 2012.[Footnote 22] Preliminary data 
for 2013 suggest that the number of complaints could increase for the 
year, as consumers had filed more than 7,000 of these complaints 
through April 30.[Footnote 23] 

Figure 2: Complaints about Foreclosure Rescue Schemes in FTC's 
Consumer Sentinel Network, 2009-2012: 

[Refer to PDF for image: line graph] 

Calendar year: 2009; 
Number of complaints: 8,937. 

Calendar year:2010; 
Number of complaints: 18,090. 

Calendar year:2011; 
Number of complaints: 20,478. 

Calendar year:2012; 
Number of complaints: 18,195. 

Source: Federal Trade Commission. 

[End of figure] 

Based upon a review of FTC's Consumer Sentinel Network, FTC 
representatives reported that the median amount paid for foreclosure 
rescue services remained relatively unchanged, from $2,400 in 2009 to 
roughly $2,500 in 2012, although not all complaints included this 
information.[Footnote 24] In addition, FTC officials reported that in 
2009, the highest percentage of complaints were from homeowners in 
California. That is, of those consumers that reported their state of 
residence, nearly 30 percent were from California. While California 
continued to be the state with the highest number of complaints, its 
share of all complaints decreased in each of the subsequent years, 
falling to 23 percent in 2010, 19 percent in 2011, 18 percent in 2012, 
and 15 percent in the first 4 months of 2013. Florida also had 
relatively more complaints compared with other states, accounting for 
between 7 and 10 percent of all complaints over the same period. 

In 2009 and 2010, most of the foreclosure rescue scheme complaints in 
the Consumer Sentinel Network were submitted directly to FTC by 
consumers. However, since 2011 the Consumer Sentinel Network's primary 
source of foreclosure rescue scheme complaints has been the Lawyers' 
Committee. In 2011, 53 percent of complaints were submitted by the 
Lawyers' Committee. That percentage increased to 61 percent in 2012 
and 75 percent in the first 4 months of 2013. Since early 2010, the 
Lawyers' Committee has maintained a complaint database for its public-
private partnerships, collectively the LMSPN, which specifically 
collects information on complaints related to foreclosure rescue 
schemes. As noted earlier, the database includes consumer complaints 
submitted directly through the Lawyers' Committee's website, as well 
as those submitted to any of LMSPN's 85 government members or 47 
nongovernment members using the Lawyers' Committee's standardized 
complaint form.[Footnote 25] In addition to basic information about 
the homeowner, the complaint form collects other detailed information 
about the alleged schemes, including type and amount of dollar losses. 
Like the complaints submitted to the Consumer Sentinel Network, 
complaints submitted to LMSPN peaked in 2011 and fell slightly in 
2012, but early data for 2013 suggest another potential increase. 

Suspicious Activity Reports from Financial Institutions: 

Treasury's Financial Crimes Enforcement Network (FinCEN) receives SARs 
from financial institutions about suspected violations of financial 
laws and regulations. FinCEN reported that in 2009 and 2010 it 
received 189 and 556 SARs, respectively, that contained narratives 
describing foreclosure rescue schemes. In 2011, the number of SARs 
related to foreclosure rescue schemes increased considerably, rising 
to 2,799, and in 2012 the number increased further to 4,427 (see 
figure 3). However, FinCEN noted that a growing awareness of and focus 
on foreclosure rescue schemes may have influenced this upward trend. 
For example, FinCEN issued an advisory in June 2010 that encouraged 
SAR filers to use "foreclosure rescue scam" in the narrative part of 
the report to facilitate the identification and isolation of pertinent 
SARs. 

Figure 3: Number of SARs Describing Foreclosure Rescue Schemes, 2009-
2012: 

[Refer to PDF for image: line graph] 

Calendar year: 2009; 
Number of SARS: 189. 

Calendar year: 2010; 
Number of SARS: 556. 

Calendar year: 2011; 
Number of SARS: 2,799. 

Calendar year: 2012; 
Number of SARS: 4,427. 

Source: Financial Crimes Enforcement Network, Mortgage Loan Fraud 
Update: Suspicious Activity Report Filings in Calendar Year 2012, 
August 2013. 

Note: A single SAR can include multiple suspicious activities. These 
numbers include all SARs that have foreclosure rescue schemes as one of 
the suspicious activities noted, and increases after 2010 may in part 
be due to FinCEN's June 2010 advisory to use the term "foreclosure 
rescue scam" in report narratives. 

[End of figure] 

Limitations of Available Data: 

While both national-and state-level sources of consumer complaints 
indicate that foreclosure rescue schemes continue to be a concern, 
consumer complaints may not provide a precise measure of the actual 
prevalence of these schemes. As we discussed in 2010, consumers can 
file complaints with any number of federal or state agencies, making 
the actual number of complaints difficult to aggregate. FTC officials 
also told us at that time that the complaints the agency received 
might represent only a small portion of potential schemes. Officials 
we contacted for this report also noted that consumers might not 
report being victims of fraud, either because they were unaware that 
they had been victimized or because they were embarrassed about having 
fallen prey to a scheme. Finally, trends in the prevalence of schemes 
over time may also be difficult to determine based on consumer 
complaints. For example, the increases in complaints from 2009 to 2011 
may indicate a growing awareness of foreclosure rescue schemes, 
prompting more victims to file complaints, rather than an actual 
increase in schemes. Similarly, increased efforts to collect complaint 
information, such as those made by the Lawyers' Committee beginning in 
2010, may have contributed to the rise in the number of complaints 
reported during this time period. The number of homeowners who were at 
least 60 days delinquent decreased during this time period, suggesting 
that factors other than the number of borrowers in danger of 
foreclosure influenced the increase in consumer complaints about 
foreclosure rescue schemes. 

SAR data have similar limitations. As we noted in 2010, they also do 
not provide a precise measure of the prevalence of foreclosure rescue 
schemes or of trends in the prevalence of these schemes, for several 
reasons. Unlike consumer complaints, SARs are filed by financial 
institutions, which may not always be aware of the crime because 
perpetrators usually approach homeowners directly and may even advise 
them to cease communications with their lenders. In addition, FinCEN 
noted that most mortgage fraud SARs report suspected fraud that 
directly affects the lender, such as false statements on loan 
applications, rather than fraud against the borrower, such as 
foreclosure rescue schemes. FinCEN analysts also noted that mortgage 
fraud SARs were typically filed 2 or more years after the suspicious 
activity began, generally due to financial institutions' lack of 
awareness of wrongdoing at the time the activity occurred. This time 
lag may make it difficult to determine trends. As noted previously, 
increased awareness of the issue may also have encouraged financial 
institutions to report foreclosure rescue schemes. In addition to the 
June 2010 advisory discussed earlier, FinCEN noted that a number of 
well-publicized federal investigations, enforcement actions, reports, 
bulletins, and guidance also likely increased awareness and 
underscored the importance of reporting these schemes. 

More Complex Schemes Have Emerged, and Some Groups Continue to Be 
Targeted: 

Several agency officials and representatives of nonprofits told us 
that foreclosure rescue schemes had become more complex over time. For 
example, we noted in 2010 that there were two primary types of 
schemes: those that charged homeowners an up-front fee for a loan 
modification that was never provided (advance-fee scheme), and those 
that transferred ownership of a house to a third party to avoid 
foreclosure (sale-leaseback scheme). Officials we contacted for this 
report, however, described several other types of schemes that had 
become common. FTC and others have also issued public education 
material that describes these kinds of schemes. While these schemes 
also often involve advance fees, they tend to be more complex, as 
described below. 

* Forensic audits. Schemes in which the scammer offers to review a 
homeowner's mortgage loan documents to determine whether the lender 
complied with state and federal mortgage lending laws. For example, in 
a case brought by FTC, the alleged scammers claimed on their website 
that "up to 95 percent of mortgages may be legally unenforceable due 
to defects like lost documents, improper notices, appraisal and/or 
predatory lending."[Footnote 26] Using this claim, they said the 
results of the "forensic audits" they provided would help consumers 
negotiate a loan modification to avoid foreclosure, according to the 
FTC complaint.[Footnote 27] They also promised that, for a fee, 
consumers could obtain mortgage modifications with reduced interest 
rates and lower monthly mortgage payments.[Footnote 28] However, 
consumers often did not receive loan modifications and discovered too 
late that their houses were in foreclosure. 

* Bankruptcy to avoid foreclosure. Schemes in which scammers promise 
to negotiate a loan modification with the lender for a fee. However, 
instead of contacting the lender, the scammer files a bankruptcy case 
in the homeowner's name, sometimes without the homeowner's knowledge. 
Officials with the Executive Office for U.S. Trustees told us that 
because the bankruptcy process temporarily halts all debt collection 
efforts, including foreclosure proceedings, the homeowner believed 
that the scammer had helped in avoiding foreclosure. In some cases, 
the homeowner continues to pay regular fees to the scammer, believing 
that the scammer is still helping. The officials reported that from 
2009 through 2012, they had made 45 criminal referrals to law 
enforcement based on foreclosure rescue schemes and brought 191 formal 
and informal civil actions. Consumer complaints in the LMSPN database 
involving such schemes have increased. In 2010, only 4 percent of 
complaints about foreclosure rescue schemes indicated that bankruptcy 
services had been offered to them, but this percentage increased to 10 
percent in the first 4 months of 2013. However, consumer complaints 
may undercount the proportion of schemes involving bankruptcy because 
consumers may not be aware that scammers have filed bankruptcy cases 
in their names. 

* Mass joinder lawsuits. Schemes in which the scammer, usually a 
lawyer or law firm, will promise the homeowner that the lender can be 
forced to modify the loan through this type of legal action.[Footnote 
29] While mass joinder lawsuits can be used legitimately, the lawyers 
bringing them are usually paid only if the lawsuit is successful. 
Fraudulent mass joinder schemes, in contrast, require the homeowner to 
pay a fee to participate in the lawsuit. In one mass joinder scheme--
which was halted at the request of FTC--the scammers were only posing 
as a law firm and engaged actual attorneys only briefly to file 
lawsuits.[Footnote 30] Once the lawsuits were filed and the scammers 
were paid, the scammers failed to follow through with the lawsuits, 
leaving homeowners in the same or worse financial shape than before, 
FTC alleged.[Footnote 31] According to FTC, the scammers charged each 
homeowner $6,000 to $10,000 in advance fees.[Footnote 32] 

* Short sale schemes. Schemes in which scammers, sometimes called 
"short sale negotiators" or "short sale processors," promise to 
expedite a short sale and usually require the homeowner to pay a fee 
for these services. In one type of short sale scheme, "short sale 
negotiators" guarantee a short sale approval in exchange for an 
advance fee. The "short sale negotiator" takes the fee and does little 
or nothing in return. 

Schemes Involving Attorneys: 

Many of the officials we contacted told us that attorney involvement 
in foreclosure rescue schemes had become a concern in recent years. 
The Lawyers' Committee also reported a recent increase in complaints 
citing legal representation (see figure 4). This increase may be 
associated, in part, with the MARS rule's exemption for attorneys. 
Further, Lawyers' Committee data through February 2013 showed that 
schemes with attorney involvement often resulted in higher losses for 
the homeowner. The average loss reported by homeowners alleging 
attorney involvement in a scheme was $3,449, compared with an average 
loss of $2,727 for homeowners reporting scams with no attorney 
involvement. 

Figure 4: Foreclosure Rescue Schemes Alleging Attorney Involvement, 
March 2010-February 2013: 

[Refer to PDF for image: multiple line graph] 

Number of schemes: 

2010: 

March; 
Schemes Alleging Attorney Involvement: 322; 
All other schemes: 406. 

April; 
Schemes Alleging Attorney Involvement: 335; 
All other schemes: 354. 

May; 
Schemes Alleging Attorney Involvement: 259; 
All other schemes: 295. 

June; 
Schemes Alleging Attorney Involvement: 305; 
All other schemes: 468. 

July; 
Schemes Alleging Attorney Involvement: 269; 
All other schemes: 389. 

August; 
Schemes Alleging Attorney Involvement: 362; 
All other schemes: 486. 

September; 
Schemes Alleging Attorney Involvement: 349; 
All other schemes: 383. 

October; 
Schemes Alleging Attorney Involvement: 419; 
All other schemes: 494. 

November; 
Schemes Alleging Attorney Involvement: 329; 
All other schemes: 420. 

December; 
Schemes Alleging Attorney Involvement: 359; 
All other schemes: 981. 

2011: 

January; 
Schemes Alleging Attorney Involvement: 351; 
All other schemes: 517. 

February; 
Schemes Alleging Attorney Involvement: 385; 
All other schemes: 391. 

March; 
Schemes Alleging Attorney Involvement: 713; 
All other schemes: 672. 

April; 
Schemes Alleging Attorney Involvement: 728; 
All other schemes: 718. 

May; 
Schemes Alleging Attorney Involvement: 499; 
All other schemes: 527. 

June; 
Schemes Alleging Attorney Involvement: 381; 
All other schemes: 373. 

July; 
Schemes Alleging Attorney Involvement: 424; 
All other schemes: 545. 

August; 
Schemes Alleging Attorney Involvement: 550; 
All other schemes: 376. 

September; 
Schemes Alleging Attorney Involvement: 471; 
All other schemes: 382. 

October; 
Schemes Alleging Attorney Involvement: 334; 
All other schemes: 335. 

November; 
Schemes Alleging Attorney Involvement: 316; 
All other schemes: 322. 

December; 
Schemes Alleging Attorney Involvement: 303; 
All other schemes: 273. 

2012: 

January; 
Schemes Alleging Attorney Involvement: 231; 
All other schemes: 237. 

February; 
Schemes Alleging Attorney Involvement: 299; 
All other schemes: 324. 

March; 
Schemes Alleging Attorney Involvement: 277; 
All other schemes: 344. 

April; 
Schemes Alleging Attorney Involvement: 261; 
All other schemes: 268. 

May; 
Schemes Alleging Attorney Involvement: 253; 
All other schemes: 217. 

June; 
Schemes Alleging Attorney Involvement: 212; 
All other schemes: 251. 

July; 
Schemes Alleging Attorney Involvement: 375; 
All other schemes: 289. 

August; 
Schemes Alleging Attorney Involvement: 579; 
All other schemes: 372. 

September; 
Schemes Alleging Attorney Involvement: 552; 
All other schemes: 453. 

October; 
Schemes Alleging Attorney Involvement: 526; 
All other schemes: 472. 

November; 
Schemes Alleging Attorney Involvement: 565; 
All other schemes: 388. 

December; 
Schemes Alleging Attorney Involvement: 526; 
All other schemes: 387. 

2013: 

January; 
Schemes Alleging Attorney Involvement: 615; 
All other schemes: 449. 

February; 
Schemes Alleging Attorney Involvement: 516; 
All other schemes: 389. 

Source: Lawyers’ Committee. 

[End of figure] 

The offices of state attorneys general also reported receiving 
consumer complaints alleging attorney involvement in schemes. For 
example, a representative of the Illinois state attorney general's 
office told us that of the complaints her office received on 
foreclosure rescue schemes, roughly 70 percent of them involved 
lawyers or law firms. In addition, a representative from the 
California state attorney general's office noted that despite the lack 
of an attorney exemption in California's advance-fee ban, the number 
of reported schemes involving attorneys had risen there as well. 

The apparent increase in the prevalence of schemes involving attorneys 
has created new challenges for law enforcement. First, stakeholders 
noted that it could be difficult to determine whether attorneys were 
actually providing legitimate services. For example, while the MARS 
rule prohibits companies from instructing consumers not to contact 
their lenders, this practice may be permitted if the foreclosure-
assistance provider is an attorney.[Footnote 33] In commenting on 
FTC's proposed MARS rule, the American Bar Association (ABA) noted 
that clients typically expected attorneys they retained to act as 
their representatives in dealing with other parties, such as lenders 
and servicers, and that up-front fees, such as a retainer, were 
typically required by attorneys providing legitimate legal services. 
[Footnote 34] However, an attorney acting for a company perpetrating a 
scheme may not actually act on the client's behalf and may be brought 
in only for a short period to file certain documents. As a result, 
determining in whose interest the attorney is acting in such cases can 
be difficult. Further, attorney-client privilege can present another 
challenge. One state official noted that attorneys could cite attorney-
client privilege as a way to avoid subpoenas and slow down 
investigations, allowing companies to continue with their schemes and 
defraud homeowners. In addition, disciplining attorneys can be a 
challenge. For example, one state official said that a separate 
disciplinary group existed for lawyers but that this group did not 
have law enforcement authority and could investigate only individual 
lawyers with a license in that state. In addition, this group cannot 
pursue a case in which the name of a law firm, rather than an 
individual, is used. Finally, investigations by these disciplinary 
groups are confidential, making it difficult for law enforcement 
agencies, such as the state attorney general's office, to work with 
them. 

ABA has taken some steps to address attorney involvement in 
foreclosure rescue schemes. In 2010, ABA's Section of Individual 
Rights and Responsibilities (IRR) received approval from ABA's Board 
of Governors to work with LMSPN. In 2011, IRR created a special 
advisory group of ABA Committees and Sections that has been involved 
in combating foreclosure rescue schemes. The purpose of the special 
advisory group is to examine the issue of lawyer participation in loan 
modifications and foreclosure rescue schemes and to develop an action 
plan to deter lawyers from participating in these schemes. A 
representative of the group noted that it would be proposing a policy 
resolution for possible ABA adoption and would educate ABA members on 
this issue. IRR expects to present the resolution to ABA's House of 
Delegates legislative session in February 2014. In addition, several 
state bar associations have issued ethics alerts, warning attorneys in 
their states against becoming involved in these schemes. 

Schemes Targeting Specific Populations: 

We noted in 2010 that some state officials said they were aware of 
foreclosure rescue schemes that targeted particular communities. 
Officials we spoke with for this report noted that some populations 
continued to be the targets of these schemes. For example, a U.S. 
Trustee Program official noted that schemes involving bankruptcy to 
avoid foreclosure had targeted minority communities. In addition, 
available data and other representatives we spoke with continued to 
indicate that minority populations could be particularly vulnerable to 
these schemes. According to the LMSPN database, complaints filed by 
black or African American homeowners have increased since 2010. In 
2010, 17 percent of complaints were filed by this group, compared with 
20 percent in 2011, 22 percent in 2012, and 23 percent in the first 4 
months of 2013. Representatives of the National Community Reinvestment 
Coalition also said that they had received more than 50 complaints 
about an attorney who had targeted mostly African-American and Latino 
communities for his scheme. The attorney told consumers that he had 
working relationships with various federal agencies and programs, took 
up-front fees from them, and did not provide any services. In another 
example, FTC filed two cases against telemarketers who targeted 
Spanish-speaking homeowners, promising mortgage modifications in 
exchange for large up-front fees.[Footnote 35] 

In addition, older homeowners appear to be common targets for 
foreclosure rescue schemes. According to the Lawyers' Committee, 
seniors (defined as those 51 years or older) are among the hardest hit 
by rescue schemes. As of October 2012, 49 percent of complaints in 
LMSPN's database were filed by those 51 or older. The average loss 
reported by seniors was $3,129, compared with the overall average loss 
of $2,997. Additionally, an FBI bulletin warns of schemes in which 
seniors in danger of foreclosure are led to believe they may obtain a 
reverse mortgage.[Footnote 36] In these schemes, seniors are informed 
that they do not qualify for a reverse mortgage but that they do 
qualify for another type of mortgage that can help save them from 
foreclosure. According to the FBI bulletin, the perpetrators locate an 
investor willing to act as a straw buyer (a person who pretends to be 
a legitimate buyer but is actually purchasing on behalf on another 
person); order fraudulent home repairs; complete an inflated 
appraisal; and obtain a forward mortgage subsequently transferring the 
property away from the seniors and pocketing the equity. The victims 
lose the equity in their home and may be told to repurchase the 
property from the scammer or lose it altogether. 

Schemes Taking Advantage of Existing Programs and Processes to Assist 
or Remediate Borrowers: 

Some foreclosure rescue schemes have associated themselves with 
government programs that assist homeowners. For example, a Lawyers' 
Committee representative told us that some have capitalized on 
Treasury's Hardest Hit Fund program, federal settlement funds, and the 
Emergency Home Loan Program by claiming that they could help 
homeowners access these programs.[Footnote 37] In one instance, a 
group known as the National Legal Help Center claimed that, for a fee, 
it could assist homeowners in getting benefits from the National 
Mortgage Settlement.[Footnote 38] In addition, this group falsely 
claimed that it was associated with IFR.[Footnote 39] Websites and 
announcements for programs such as HAMP, the National Mortgage 
Settlement, and IFR now have warnings about scams and the availability 
of free legitimate help, but a Lawyers' Committee representative noted 
that such alerts had not always been included in earlier 
communications with homeowners. 

The Lawyers' Committee representative also noted that the sheer number 
of government programs might provide opportunities for dishonest 
actors to confuse homeowners, making them unsure where to turn for 
legitimate help. A representative of the Homeownership Preservation 
Foundation (HPF), which runs the Homeowner's HOPE Hotline, noted that 
complaints related to rescue schemes had spiked in March 2012 and 
January 2013.[Footnote 40] The March 2012 spike may be related to the 
first wave of IFR's national advertising campaign (January-February 
2012), along with the announcement of the National Mortgage Settlement 
(February 2012). The January 2013 spike followed announcements of IFR 
payment agreements in January 2013 (see figure 5). 

Figure 5: Timeline of Government Announcements and Number of 
Foreclosure Rescue Scheme Complaints Submitted to the HOPE Hotline: 

[Refer to PDF for image: line graph] 

March 2009: 
Announcement of the Home Affordable Modification Program (HAMP). 

2010: 

February: 
Number of complaints: 484. 

April: 
Number of complaints: 900. 

May: 
Number of complaints: 983. 

September: 
Number of complaints: 1,151. 

2011: 

January: 
Number of complaints: 1,340. 

May: 
Number of complaints: 2,017. 

July: 
Number of complaints: 2,373. 

September: 
Number of complaints: 2,387. 

2012: 

January-February 2012: 
First wave of Independent Foreclosure Review (IFR) national 
advertising campaign. 

January: 
Number of complaints: 2,526. 

February 2012: 
National Mortgage Settlement announcement. 

February: 
Number of complaints: 2,837. 

March: 
Number of complaints: 3,152. 

April-May 2012: 
Second wave of IFR national advertising campaign. 

April: 
Number of complaints: 2,702. 

May: 
Number of complaints: 2,314. 

June: 
Number of complaints: 2,289. 

July: 
Number of complaints: 2,433. 

August: 
Number of complaints: 2,233. 

September: 
Number of complaints: 1,880. 

October: 
Number of complaints: 2,275. 

November: 
Number of complaints: 2,171. 

December: 
Number of complaints: 2,234. 

2013: 

January 2013: 
Announcement of IFR Payment Agreement. 

January: 
Number of complaints: 3,030. 

February: 
Number of complaints: 2,010. 

March: 
Number of complaints: 2,203. 

April: 
Number of complaints: 2,529. 

13-5; 
Number of complaints: 1,775. 

May: 
Number of complaints: 1,298. 

Source: Homeownership Preservation Foundation and GAO analysis. 

[End of figure] 

Agency officials and representatives of other organizations continued 
to cite the challenges to combating these schemes that we noted in 
2010. For example, law enforcement officials continued to note that 
the ability of scammers to start up and shut down quickly made it 
difficult to combat these schemes. In addition, some said that 
scammers could operate under different names, making them difficult to 
track. A few stakeholders noted that the small dollar amounts of 
individual losses presented a challenge because federal agencies were 
less likely to be able to take on the cases. However, as we noted in 
2010, it may be easier for state attorneys general to pursue these 
cases. Finally, we noted in 2010 that officials had told us that it 
was essential to encourage consumers to report suspicious incidents to 
authorities. As noted above, agency officials and representatives of 
nonprofit organizations we spoke with for this report also said that 
consumers might not report potential schemes, either because they were 
not aware that they were being victimized or were too embarrassed to 
report it. They cited consumers' unwillingness to report these schemes 
as an ongoing challenge. 

FFETF Members Have Focused on Prevention, Detection, and Enforcement 
to Combat Foreclosure Rescue Schemes: 

Since we last reported on this issue in 2010, FFETF and its members 
have undertaken a number of activities intended to enhance 
coordination among federal, state, and local authorities responsible 
for combating foreclosure rescue schemes. These efforts are consistent 
with the three key elements of GAO's fraud prevention model: (1) 
preventive controls, (2) detection and monitoring, and (3) 
investigations and prosecutions.[Footnote 41] FFETF's preventive 
efforts have focused on educating consumers about these schemes to 
help them avoid becoming victimized. FFETF and its members have also 
made efforts to enhance the reporting of potential incidents by both 
consumers and financial institutions to aid in the detection and 
monitoring of these schemes. FFETF member agencies that we contacted 
told us that one of the key outcomes of the task force had been 
greater information sharing and coordination among enforcement 
agencies regarding these schemes that facilitated investigations and 
prosecutions. 

MFWG Members Have Developed and Participated in Outreach to Educate 
Consumers about Schemes: 

Members of FFETF's MFWG have focused their outreach efforts on raising 
public awareness of foreclosure rescue schemes in order to prevent 
homeowners from being victimized. The results of our prior work serve 
to emphasize the overall lesson learned that fraud prevention is the 
most effective and efficient means to minimize fraud, waste, and 
abuse.[Footnote 42] MFWG has used a variety of approaches to consumer 
education and outreach that are outlined in MFWG's annual strategic 
scorecards, a management tool MFWG developed to track its progress in 
combating foreclosure rescue schemes.[Footnote 43] Examples of MFWG's 
outreach and education efforts include holding regional education 
summits for distressed homeowners, housing counselors, and public 
advocates and directing more individuals to FFETF's mortgage fraud 
information on its website, StopFraud.gov, which FFETF considers a one-
stop site for consumers to learn how to protect themselves from 
becoming victims and to report cases of fraud. 

MFWG has held at least eight regional summits near areas that have 
been hardest hit by foreclosures since 2010. During the summits, 
homeowners and local law enforcement agencies received information on 
mortgage fraud trends from other law enforcement officials, victims, 
housing counselors, and industry experts. According to FFETF, the 
presenters represented law enforcement, victims, housing counselors, 
industry experts, and others who discussed mortgage fraud issues in 
the community, including foreclosure rescue schemes. In addition, MFWG 
noted that it held 27 events to educate homeowners, counselors and 
public advocates in fiscal year 2012, exceeding its target goal of 20 
events. These events included foreclosure prevention forums, training 
for consumer groups and legal services communities, and presentations 
to members or representatives of the armed forces. For example, in 
2012 two mortgage fraud summits in Las Vegas and Los Angeles included 
discussions on the impact of mortgage fraud on the community, trends 
in mortgage fraud, and ways to avoid becoming a victim. The Los 
Angeles summit was attended by officials and practitioners involved in 
mortgage fraud enforcement and prevention and included representatives 
such as the FBI, FTC, HUD, California Attorney General's Office, 
California State Bar, California Department of Real Estate, and other 
federal, state, county, and local agencies, including the Los Angeles 
County Department of Consumer Affairs. 

Individual MFWG members and nonprofit organizations have also 
conducted outreach as a part of their own efforts to increase 
awareness of foreclosure rescue schemes. For example, HUD's "Know it. 
Avoid it. Report it." information campaign alerts homeowners to the 
availability of free housing counselors who can help with foreclosure 
issues and provide information on avoiding foreclosure schemes. 
According to HUD, the information campaign merges the efforts of 
NeighborWorks, the Lawyers' Committee, and the Homeowner's HOPE 
Hotline to provide an "early warning system" that helps homeowners 
protect themselves and their homes, while also providing the tools 
necessary to report schemes to enforcement authorities. HUD targets 
its information campaign to areas with the highest rates of 
foreclosure using multiple kinds of outreach. One official told us 
that in 2011, the HUD campaign delivered information on schemes via 
television, radio, and print advertisements to the areas affected by 
high rates of foreclosure. In 2012, HUD shifted its outreach to these 
areas to digital and radio-based mediums. 

According to the MFWG strategic scorecard, the mortgage fraud 
prevention and victim assistance sections of the StopFraud.gov website 
received over 15,000 hits during fiscal year 2012. The mortgage fraud 
and victim assistance sections contain links to foreclosure rescue 
scheme resources and educational materials created by other federal 
agencies, such as FTC, SIGTARP, and nonprofit organizations such as 
NeighborWorks. For example, the mortgage fraud webpage links to 
SIGTARP, CFPB, and Treasury's joint alerts titled "Tips for Avoiding 
Mortgage Modification Scams" and "Avoiding HAMP Mortgage Modification 
Scams; Resources for Servicemembers," and directs individuals to the 
websites of other agencies and nonprofit organizations, such as 
NeighborWorks, LoanScamAlert.org, and the Mortgage Bankers Association 
Consumer Help Desk. SIGTARP officials told us that promoting 
StopFraud.gov and the associated foreclosure rescue scheme resources 
allows individuals to better protect themselves from victimization. 
According to FFETF's first year report, FFETF has also partnered with 
LMSPN members, Fannie Mae, Freddie Mac, the Lawyers' Committee, and 
NeighborWorks to support PreventLoanScams.org, which supports 
national, state, and local law enforcement efforts to fight mortgage 
fraud.[Footnote 44] The website provides tips on how to avoid schemes, 
information on how to obtain assistance through free housing 
counseling, and an accessible complaint form that can be filled out 
online and then entered into the LMSPN complaint database. 

Most individual members of MFWG with whom we spoke had also developed 
web pages that provided information on foreclosure rescue schemes or 
directed consumers to the Lawyers' Committee and NeighborWorks 
websites on foreclosure rescue schemes. Six of the seven MFWG member 
agencies we spoke with had specific information on foreclosure rescue 
schemes on their websites, including descriptions of schemes and 
information on how to submit a complaint. In addition, several agency 
and nonprofit organizations' websites emphasize that borrowers do not 
need to pay for loan modification assistance. Six of the seven MFWG 
member agencies we interviewed posted information on their websites 
about the free assistance that is available to borrowers who are at 
risk of foreclosure. 

Federal Detection Efforts Continue to Focus on Enhanced Incident 
Reporting: 

MFWG member agencies have continued to collect data on foreclosure 
rescue schemes in order to support efforts to detect and combat 
them.[Footnote 45] Agency officials and nonprofit representatives told 
us that they collected information on the borrower, the services they 
were offered, the amount they paid for the services, and any contact 
information for the individual or company that offered the service. 
They explained that individuals could submit their complaints through 
the detailed LMSPN complaint forms, housing counselors staffing the 
Homeowner's HOPE Hotline's dedicated team, or individual agency 
hotlines. Agencies might also receive complaints through referrals 
from enforcement agencies, mail, and emails. 

Since 2010, MFWG and others have made efforts to improve the 
collection of consumer complaints related to foreclosure rescue 
schemes. For example, the working group achieved its goal of 
increasing the number of states reporting consumer complaints to FTC's 
Consumer Sentinel Network from 9 to 14 in 2012, and set a goal for 20 
states by the end of 2013.[Footnote 46] In addition, CFPB has begun 
collecting consumer complaints about these schemes and submits them to 
the FTC's Consumer Sentinel Network. Also, LMSPN created a 
standardized complaint form that is used by all of its government and 
nonprofit partners. According to Lawyers' Committee representatives, 
partner organizations have links to the online form on their websites 
and the form is also made available at homeowner events, such as 
Making Home Affordable Program events and during conversations between 
servicers or housing counselors and borrowers. As of April 30, 2013, 
nearly three-quarters of the foreclosure rescue scheme complaints in 
FTC's Consumer Sentinel Network database had been submitted through 
LMSPN complaint database. 

Agencies have also continued to make use of available information to 
aid investigations. In 2010, we reported that FinCEN provided 
enforcement authorities with investigative information on SAR filings 
and other data to help develop leads on potential foreclosure rescue 
schemes. FinCEN officials told us that FinCEN had conducted additional 
analysis in support of investigative cases for more than 20 state and 
federal agencies. In addition, state and federal officials told us 
that they could access complaint information to help develop leads 
against the criminals perpetrating the schemes. For example, officials 
from FTC said that its staff members often started their 
investigations by focusing on companies and individuals associated 
with a high number of complaints in FTC's Consumer Sentinel Network. 
Similarly, a U.S. attorney we spoke with stated that his office 
regularly consulted several databases, including the Consumer Sentinel 
Network, when trying to develop leads for their investigations. Other 
individuals we spoke with said that they also used the databases to 
find additional information for their ongoing investigations. For 
example, a representative from one of the attorney generals' offices 
whom we interviewed stated that investigators might search the 
Consumer Sentinel Network for complaints with variations of a certain 
attorney's name. Another state official from a state attorney 
general's office told us that the office generally used the Consumer 
Sentinel Network to determine whether additional victims were 
associated with an individual or company in order to more effectively 
calculate restitution. 

MFWG members have also sought mechanisms to help financial 
institutions more easily identify suspected mortgage fraud, including 
foreclosure rescue schemes. As previously discussed, FinCEN issued an 
advisory in June 2010 encouraging SAR filers to use "foreclosure 
rescue scam" in the narrative portion of the report to help law 
enforcement agencies more easily identify and isolate pertinent SARs. 
FinCEN officials also noted that as of March 2012, a specific checkbox 
for foreclosure rescue schemes was added to the SAR form, further 
facilitating the identification of these schemes. According to the 
officials, federal and state law enforcement and regulatory agencies 
continue to track SARs reporting foreclosure rescue schemes, as these 
reports provide insight into trends for this crime and leads for the 
initiation and support of investigations and enforcement efforts. MFWG 
co-chairs discuss the SAR filings and other complaint data twice a 
year as part of their ongoing effort to identify emerging trends in 
foreclosure rescue schemes. 

MFWG Has Focused on Facilitating Information Sharing and Coordination 
as Key Efforts to Enhance Enforcement: 

Multiple representatives of MFWG member agencies that we contacted 
told us that MFWG had facilitated information sharing and coordination 
among enforcement agencies on investigations. During MFWG meetings, 
members discuss the best way to coordinate on emerging trends in 
foreclosure rescue schemes and enforcement jurisdiction. One FTC 
official noted that MFWG had been beneficial because it enabled 
members to make connections with officials from other agencies with 
whom they might not otherwise interact. Officials from the Executive 
Office for the U.S. Trustees told us that some of their working 
relationships were a direct outgrowth of their membership in FFETF. 
For example, the office did not have any contact with SIGTARP until it 
became part of the working group. Since beginning to share 
information, the two entities have been able to develop a case against 
perpetrators of a national mortgage foreclosure rescue scheme. In 
addition, according to a FFETF representative, the Los Angeles and Las 
Vegas mortgage fraud summits held to reach out to homeowners also 
served the purpose of convening federal, state, and local enforcement 
agencies to discuss how to improve their regional enforcement 
coordination efforts. 

Between 2009 and 2012, working group members using joint 
investigations and broad enforcement initiatives coordinated their 
investigations and successfully filed criminal charges against more 
than 226 defendants allegedly involved in foreclosure rescue schemes. 
In 2010, we discussed MFWG's efforts to prosecute individuals and 
companies perpetrating schemes through Operation Stolen Dreams, a 
series of federal and state law enforcement actions undertaken by 
agencies represented on FFETF. DOJ reported that Operation Stolen 
Dreams involved 119 criminal defendants allegedly involved in 
foreclosure rescue schemes--and more than 100 civil enforcement 
actions that pertained to the schemes. In August 2013, MFWG members 
announced the results of the Distressed Homeowners Initiative, a year-
long coordinated enforcement effort conducted by members of MFWG in 
fiscal year 2012. While Operation Stolen Dreams had a broader focus on 
mortgage fraud, the Distressed Homeowners Initiative specifically 
targeted fraud that preyed on homeowners, such as foreclosure rescue 
schemes. DOJ officials told us that the initiative included undercover 
work and an enforcement surge led by FBI in Southern California. They 
also said that FBI compiled information packages on potential targets, 
which it shared with its field offices across the country. The 
initiative targeted perpetrators both civilly and criminally and, 
according to DOJ, resulted in criminal charges against 107 defendants. 
The estimated losses to at least 17,185 victims totaled more than $95 
million. Cases were also filed against 128 civil defendants in federal 
courts across the country. In these cases, at least 19,198 victims 
suffered an estimated total loss amount of $54 million.[Footnote 47] 

Federal enforcement agencies have successfully coordinated 
investigations beyond the broad enforcement initiatives discussed 
earlier. SIGTARP officials stated that FFETF's success is due to 
members' ability to work more efficiently together than as individual 
agencies. SIGTARP reported that 43 of its criminal investigations 
relating to foreclosure rescue schemes were multiagency efforts 
between 2009 and 2012. In addition, FTC officials told us that 14 of 
their 36 cases involving foreclosure rescue schemes were conducted in 
partnership with other agencies during that same period and that these 
partnerships were a direct outgrowth of their membership in FFETF. 
FHFA's Office of the Inspector General also coordinated on 12 cases 
with other FFETF members between 2011 and 2012. 

Some agency officials told us that foreclosure rescue scheme cases did 
not comprise a large proportion of their workload. For example, FHFA 
officials told us that the majority of cases FHFA filed involved loan 
origination fraud. However, FTC officials told us that 36 of the 
agency's 363 consumer protection cases involved the MARS rule and 
foreclosure rescue schemes between 2009 and 2012--a relatively 
substantial portion given the wide range of consumer protection issues 
FTC covers. In addition, officials told us that many investigations 
related to foreclosure rescue schemes were conducted at the state 
level. For example, in 2010, the Florida Attorney General's Office 
filed 19 civil cases for foreclosure rescue schemes, representing 8.4 
percent of its caseload for that year. An official from the California 
Attorney General's Office told us that between 2009 and 2012 its 
office filed 20 criminal cases and an estimated 10 to 15 civil cases 
for foreclosure rescue schemes. Officials from the Arizona Attorney 
General's Office told us that it received nearly 5,000 complaints 
relating to foreclosure rescue schemes between 2009 and 2012 and 
successfully litigated 23 civil cases during that same time. 

MFWG has also identified other areas of focus in its enforcement 
efforts, including shutting down or forcing into compliance confusing, 
misleading, or fraudulent web advertisers and websites and conducting 
training for DOJ attorneys and prosecutors, state and local attorneys, 
and investigators. For example, according to the MFWG strategic 
scorecard, Treasury, SIGTARP, and FTC took action against over 800 
confusing, misleading, or fraudulent websites in fiscal year 2012. 
Treasury officials told us that they conducted web scans in order to 
identify unauthorized uses of Treasury program trademarks or 
misrepresentations of programs. Between 2009 and 2012, Treasury issued 
notices of trademark infringement (cease-and-desist letters) to owners 
of approximately 400 websites for unauthorized use of Treasury program 
trademarks. In addition, SIGTARP officials told us that they contacted 
Internet search engines (e.g., Google, Yahoo, Bing) to take down over 
200 alleged fraudulent websites. They noted that subsequently, these 
companies suspended relationships with 900 web advertising agencies 
related to the alleged fraudulent websites. 

Another of MFWG's ongoing efforts is mortgage fraud training and 
outreach to law enforcement attorneys and industry representatives. 
For example, DOJ, FBI, and inspectors general from FHFA and HUD 
conducted 25 training events in 2012 for state and local attorneys and 
investigators across the country. Officials from the FHFA inspector 
general's office told us that the office had coordinated with the 
National District Attorneys Association to conduct such training for 
state attorneys general. The officials also said that the office also 
did outreach to industry representatives, including the Mortgage 
Bankers Association, the National Association of Appraisers, and the 
National Association of Mortgage Regulators. MFWG members said that 
their outreach and enforcement efforts would continue in order to 
educate homeowners and prevent more from falling victim to schemes. 

Most agency officials we spoke with said that they did not 
specifically track the amount of resources dedicated to combating 
foreclosure rescue schemes, but some federal and state officials noted 
resource limitations as a challenge. A U.S. Trustee official told us 
that limited resources were a challenge and that he could not be sure 
whether resource constraints would allow for the same level of effort 
in combating foreclosure rescue schemes in the future. The U.S. 
Trustee Program's 2013 Budget Request notes that these schemes are 
complex and require the retention and training of specialized 
attorneys and other staff. Other officials told us that more cases 
could be pursued if more resources were available, but some officials 
said that resources were not a limiting factor in the amount of 
enforcement activity. Representatives of nonprofit organizations we 
spoke with cited limited resources as a constraint. For example, a 
NeighborWorks representative noted that finding adequate resources had 
been a challenge and that its Loan Scam Alert campaign had not been 
able to purchase as much paid advertising as it would have liked. As a 
result, the representative noted that the campaign may not have been 
receiving as much television coverage as the schemes were. 

Available data suggest that foreclosure rescue schemes continue to be 
a concern, and federal agencies and others have increased their 
efforts to combat these schemes in recent years. Our fraud prevention 
framework highlights that increased awareness of fraud is crucial to 
preventing individuals from falling victim to fraudulent situations. 
Homeowners who have adequate information on foreclosure rescue schemes 
and legitimate sources of assistance will be more likely to understand 
and make more informed decisions when seeking assistance. Federal 
agencies will need to continue to coordinate their outreach, 
detection, and enforcement efforts to increase awareness among 
homeowners and prevent more from falling victim to schemes. 

Agency Comments: 

We provided a draft of this report for review and comment to the heads 
of the Departments of Justice, Housing and Urban Development, and the 
Treasury, the Consumer Financial Protection Bureau, the Federal 
Housing Finance Agency, Fannie Mae, Freddie Mac, the Federal Trade 
Commission, the Special Inspector General for the Troubled Asset 
Relief Program, and the U.S. Postal Inspection Service. We received 
written comments from the Assistant Secretary for Financial Stability 
at the Department of the Treasury and SIGTARP, which are summarized 
below and reprinted in appendices II and III, respectively. DOJ, HUD, 
FHFA, FTC, SIGTARP, Treasury, and the U.S. Postal Inspection Service 
provided technical comments that were incorporated, as appropriate. 

In its written comments, Treasury noted that it valued GAO's insights 
as it continues to combat foreclosure rescue schemes. Treasury 
reiterated that the Office of Financial Stability conducts daily 
website scans to identify unauthorized uses of Treasury program 
trademarks or misrepresentations of programs, and has issued notice of 
trademark infringement to owners of approximately 400 websites. 
Treasury also highlighted that the Office of Financial Stability 
conducts preliminary investigations into allegations of foreclosure 
rescue schemes related to the Troubled Asset Relief Program, the 
findings of which may result in referrals to SIGTARP and other law 
enforcement agencies, and has partnered with CFPB to provide the 
public with tips and alerts for avoiding mortgage modification schemes. 

In its technical comments, SIGTARP noted that it is an independent 
entity within Treasury and is not subject to the supervision of the 
Secretary. As such, SIGTARP requested that we separate our discussion 
of SIGTARP from our discussion of Treasury. In response, we listed 
SIGTARP as a separate agency from Treasury in our description of 
agencies' roles in combating foreclosure rescue schemes. In addition, 
SIGTARP noted that the draft report did not reflect the work of the 
FFETF's Rescue Fraud Working Group, which also plays a role in 
combating these schemes. We added a description of this working group 
and noted that SIGTARP is one of its co-chairs. SIGTARP in its written 
comments stated that it concurred with the sections of the report 
related to SIGTARP's work and noted that it has made significant 
progress in combating these schemes and will continue to work with law 
enforcement partners to investigate them. 

We are sending copies of this report to the appropriate congressional 
committees and to the heads of the Departments of Justice, Housing and 
Urban Development, and the Treasury, the Consumer Financial Protection 
Bureau, the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, 
the Federal Trade Commission, the Special Inspector General for the 
Troubled Asset Relief Program, and the U.S. Postal Inspection Service. 
In addition, the report will be available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Signed by: 

Lawrance Evans Jr. 
Director, Financial Markets and Community Investment: 

List of Addressees: 

The Honorable Tim Johnson Chairman: 
The Honorable Mike Crapo: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Jeb Hensarling: 
Chairman: 
The Honorable Maxine Waters: 
Ranking Member: 
Committee on Financial Services: 
United States House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To examine the nature and prevalence of mortgage foreclosure rescue 
and loan modification schemes, we analyzed available information on 
consumer complaints about foreclosure rescue schemes from the Federal 
Trade Commission's (FTC) Consumer Sentinel Network, as well as the 
Lawyers' Committee for Civil Rights Under Law's Loan Modification Scam 
Prevention Network (LMSPN) database. In addition, we examined 
published information on the number of Suspicious Activity Reports 
related to foreclosure rescue schemes. We spoke with officials and 
representatives who manage these databases about their data collection 
processes and internal quality controls and tested the data where 
applicable. We found FTC's Consumer Sentinel Network, LMSPN, and SAR 
data to be sufficiently reliable for the purpose of discussing the 
nature and prevalence of foreclosure rescue schemes in this report. We 
recognize that the total number of foreclosure rescue schemes reported 
does not capture all occurrences of schemes; however it captures the 
available information on this area of fraud. We also contacted seven 
member agencies of the Financial Fraud Enforcement Task Force's 
(FFETF) Mortgage Fraud Working Group (MFWG) that were active in 
combating foreclosure rescue schemes--the Consumer Finance Protection 
Bureau, the Department of Justice, the Federal Housing Finance Agency 
and its Office of Inspector General, FTC, the Department of Housing 
and Urban Development and its Office of Inspector General, the 
Department of the Treasury, the Special Inspector General for the 
Troubled Asset Relief Program, and the U.S. Postal Inspection Service. 
In addition, we contacted representatives of two government-sponsored 
enterprises, Fannie Mae and Freddie Mac, as well as the offices of the 
attorneys general from Indiana and the five states we spoke with for 
our 2010 report--Arizona, California, Florida, Illinois, and New York--
states with some of the highest numbers of potential foreclosures. We 
also spoke with a number of nonprofit organizations that are actively 
addressing these schemes. 

To determine the status and scope of the federal government's 
multiagency effort and other major efforts to combat these schemes, we 
interviewed officials and obtained relevant documentation from FFETF 
and MFWG members listed previously. We also interviewed officials and 
obtained documents from the enterprises and nonprofit organizations 
that have undertaken major efforts in this area, including the 
National Fair Housing Alliance, the National Community Reinvestment 
Coalition, HOPE NOW, the Homeownership Preservation Foundation, and 
lead members of LMSPN, including the Lawyers' Committee for Civil 
Rights Under Law and NeighborWorks America.[Footnote 48] We also 
reviewed MFWG's 2012 and 2013 strategic scorecards to determine the 
activities the working group had completed. We also collected 
information on the number of civil and criminal foreclosure rescue 
scheme cases state and federal agencies pursued and reviewed 
individual agencies' websites for information on foreclosure rescue 
schemes. We reviewed Standards for Internal Control in the Federal 
Government to identify requirements for effective internal controls 
related to fraud detection and prevention.[Footnote 49] Additionally, 
we looked at our past reviews of federal programs in which we 
identified the key elements of a framework for fraud prevention, 
detection, and prosecution.[Footnote 50] Finally, we interviewed 
agency officials about their efforts to conduct outreach, collect 
consumer complaints, and conduct enforcement activities related to 
these types of schemes. 

We conducted this performance audit from November 2012 to October 2013 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of the Treasury: 

Department of the Treasury: 
Assistant Secretary: 
Washington, D.C. 

October 2, 2013: 

Lawrance Evans, Jr. 
Director: 
Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Evans: 

Thank you for providing the Department of the Treasury (Treasury) with 
an opportunity to review your draft report entitled Financial Crime: 
Foreclosure Rescue Schemes Have Become More Complex and Efforts to 
Combat Them Continue. We appreciate GAO's acknowledgment of Treasury's 
efforts to combat financial fraud, and its involvement with the 
Financial Fraud Enforcement Task Force, which is comprised of more 
than 20 federal agencies, 94 U.S. Attorneys' Offices, and state and 
local partners. We note that your report contains no recommendations. 

The Office of Financial Stability (OFS) conducts daily website scans 
to identify unauthorized uses of Treasury program trademarks or 
misrepresentations of programs. Between 2009 and 2012, Treasury issued 
notices of trademark infringement (cease-and-desist) to owners of
approximately 400 web sites for unauthorized use of Treasury program 
trademarks. Additionally, OFS conducts preliminary investigations into 
allegations of foreclosure rescue schemes related to the Troubled 
Assets Relief Program (T ARP), the findings of which may result in 
referrals to the Special Inspector General for TARP (SIGTARP) and 
other appropriate law enforcement and regulatory authorities. Treasury 
has also partnered with SIGT ARP and the Consumer Financial Protection 
Bureau to provide the public with important tips and alerts for 
avoiding mortgage modification scams. 

Treasury values GAO's insight as we continue our efforts to combat 
financial fraud. 

Sincerely, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of section] 

Appendix III: Comments from the Special Inspector General for the 
Troubled Asset Relief Program: 

Office of the Special Inspector General: 
For The Troubled Asset Relief Program: 
1801 L Street, NW, 4th Floor: 
Washington, D.C. 20220: 

October 25, 2013: 

Gene Dodaro: 
Comptroller General of the United States: 
Government Accountability Office: 
441 G. Street, NW: 
Washington, D.C. 20548: 

In Re: GAO-14-17: 

Dear Comptroller General Dodaro: 

The Office of the Special Inspector General for the Troubled Asset 
Relief Program (SIGTARP) welcomed the opportunity to review and 
provide comments regarding your draft audit report titled, Financial 
Crime: Foreclosure Rescue Schemes Have Become More Complex and Efforts
to Combat Them Continue (GAO-14-17) performed under engagement code 
250695. Our written technical comments were provided previously in my 
letter dated October 8, 2013. With the adoption of our comments, 
SIGTARP concurs with the section of your report related to SIGTARP's 
work. SIGTARP and our partners have made, and will continue to make 
significant and meaningful progress in our coordinated efforts to 
combat mortgage modification fraud and other foreclosure rescue 
schemes. 

SIGTARP has been vigilant in investigating TARP related mortgage fraud 
schemes since our creation in late 2008. To further our efforts and 
resources, we routinely partner with many criminal law enforcement 
organizations and civil enforcement organizations primarily through
the President's Financial Fraud Enforcement Task Force (FFETF). 
SIGTARP is a co-chair of the FFETF's Rescue Fraud Working Group (RFWG) 
along with Department of Justice and Treasury, and through this 
working group, we with our law enforcement partners, have brought 
justice and accountability to those that engage in mortgage 
modification fraud and other foreclosure rescue schemes to take 
advantage of struggling homeowners. 

As a result of SIGTARP investigations, with our law enforcement 
partners, criminal charges have been filed against 46 individuals 
related to mortgage modification scams or other foreclosure rescue 
schemes, 28 of these defendants have been convicted while others await
trial, and 22 of those convicted were sentenced to prison. The average 
prison sentence resulting from a SIGTARP investigation related to 
mortgage modification schemes is over 40 months, with two individuals 
receiving prison sentences of 132 months each. 

In addition, SIGTARP's important work to combat mortgage modification 
fraud and other foreclosure rescue schemes has resulted in returning 
money to victims and the Government. As a result of SIGTARP's 
investigations 65 individuals and entities have been charged in civil
complaints, and many were banned from the telemarketing industry, 
doing business with the government, or lost their law licenses. 
SIGTARP's investigations have resulted in actual recoveries to the 
government or victims to date totaling nearly $2 million. However, we 
expect additional recoveries because our investigations have resulted 
in court orders of forfeiture totaling over $2.1 million, orders of 
restitution totaling over $8.6 million, and civil judgments totaling 
over $12.3 million for a combined total of $23 million. 

By the time SIGTARP arrests mortgage modification fraud scammers, it 
is often too late for homeowners who have lost precious last dollars 
and in some cases, their home. SIGTARP has also taken proactive 
measures to prevent homeowners from becoming victims in the first place.
First, in order to educate homeowners, SIGTARP, though the RFWG 
spearheaded a financial literacy effort bringing on board CFPB and 
Treasury to release two consumer alerts, one directed to all 
homeowners, and a second alert directed to members of the armed forces 
who were being targeted specifically. These alerts list the common red 
flags of mortgage modification schemes that should help homeowners 
avoid becoming a victim. Second, in order to minimize the number of 
victims of these schemes, we aggressively work with our civil partner
agencies including the states' Attorney Generals offices to quickly 
shut down any and all fraudulent schemes with such tools as cease and 
desist orders, restraining orders, and receiverships, among other 
civil actions. Third, after becoming aware in investigations that con 
artists were targeting homeowners on the internet, we took aggressive 
action normally unheard of in law enforcement to shutdown over 200 
alleged fraudulent web sites that bore the hallmarks
of these schemes. SIGTARP worked with Google & Microsoft (owner of 
Yahoo & Bing) to take down over 200 alleged fraudulent web sites and 
subsequently both companies suspended relationships with 900 web 
advertising agencies related to the alleged fraudulent web sites. 

SIGTARP will continue to be vigilant and aggressive in protecting 
distressed homeowners for these schemes as they relate to TARP. 

Should you have any questions or need additional information, please 
feel free to contact me. 

Sincerely, 

Signed by: 

Christy L. Romero: 
Special Inspector General: 

Cc: 
Lawrance Evans, Jr.
Director: 
Financial Markets and Community Investments: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lawrance L. Evans, Jr. (202) 512-8678 or evansl@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, other key contributors to 
this report were Harry Medina (Assistant Director), Rachel E. Batkins, 
Bethany M. Benitez, Emily Chalmers, Jena Sinkfield, Andrew Stavisky, 
Winnie Tsen, and James D. Vitarello. 

[End of section] 

Footnotes: 

[1] CoreLogic. CoreLogic National Foreclosure Report. (Irvine, Calif.: 
May 2013). 

[2] GAO. Homeownership Preservation: Federal Efforts to Combat 
Foreclosure Rescue Schemes are Under Way, but Improved Planning 
Elements Could Enhance Progress, [hyperlink, 
http://www.gao.gov/products/GAO-10-787] (Washington, D.C.: July 15, 
2010). 

[3] FFETF is composed of more than 20 federal agencies, 94 U.S. 
Attorneys' Offices and state and local partners. 

[4] Pub. L. No. 111-203, § 1492, 124 Stat. 1376, 2206 (2010). 

[5] [hyperlink, http://www.gao.gov/products/GAO-10-787]. 

[6] FTC's Consumer Sentinel Network is a database of consumer 
complaints received by FTC, as well as those filed with law 
enforcement and other organizations, including other federal and state 
agencies and nonprofit organizations. LMSPN was formed in 2009 by the 
Lawyers' Committee for Civil Rights Under Law, a nonprofit legal 
advocacy organization, to engage the Committee and others in the fight 
against foreclosure rescue schemes. It maintains a database of 
consumer complaints submitted directly through a website created by 
the Lawyers' Committee for LMSPN--PreventLoanScams.org, and to any of 
the network's 85 government or 47 nongovernment members. 

[7] To assist law enforcement agencies in their efforts to combat 
money laundering, terrorist financing, and other financial crimes, the 
Bank Secrecy Act, Pub. L. No. 91-508, 84 Stat. 1114 (1970) (codified 
as amended in scattered sections of 12, 15, 31 U.S.C.) requires 
financial institutions to file SARs to inform the federal government 
of transactions related to possible financial crimes. See 31 U.S.C. 
§5318(g). 

[8] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[9] For example, see GAO, Hurricanes Katrina and Rita Disaster Relief: 
Prevention Is the Key to Minimizing Fraud, Waste, and Abuse in 
Recovery Efforts, [hyperlink, http://www.gao.gov/products/GAO-07-418T] 
(Washington, D.C.: Jan. 29, 2007). 

[10] Pub. L. No. 110-343, § 109, 122 Stat. 3765, 3774 (codified at 12 
U.S.C. § 5219). GAO, Troubled Asset Relief Program: Home Affordable 
Modification Program Continues to Face Implementation Challenges, 
[hyperlink, http://www.gao.gov/products/GAO-10-556T] (Washington, 
D.C.: Mar. 25, 2010) and Troubled Asset Relief Program: Treasury 
Continues to Face Implementation Challenges and Data Weaknesses in its 
Home Affordable Modification Program, [hyperlink, 
http://www.gao.gov/products/GAO-11-288] (Washington, D.C.: Mar. 17, 
2011). 

[11] In April 2011, 14 servicers entered into consent orders with the 
Office of the Comptroller of the Currency, Office of Thrift 
Supervision, and/or Board of Governors of the Federal Reserve. They 
were: Ally Financial, Inc.; Aurora Bank, FSB; Bank of America, N.A.; 
Citibank, N.A.; EverBank Financial Corp.; HSBC Bank USA, N.A.; 
JPMorgan Chase, N.A.; Metlife Bank, N.A.; OneWest Bank, FSB; PNC Bank, 
N.A.; Sovereign Bank; SunTrust Bank, Inc.; U.S. Bank, N.A.; and Wells 
Fargo Bank, N.A. and their affiliates or acquired loan servicing 
companies. The Federal Deposit Insurance Corporation was also a party 
to the Federal Reserve's order with Ally Financial (GMAC Mortgage). 
The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 
No. 111-203, §§ 311-313, 124 Stat. 1376, 1520-23 (2010), eliminated 
the Office of Thrift Supervision and transferred its regulatory 
responsibilities to the Office of the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, and the Federal Reserve. The 
transfer of these powers was completed on July 21, 2011, and the 
Office of Thrift Supervision was officially dissolved 90 days later on 
October 19, 2011. Subsequently, two additional institutions, Goldman 
Sachs and Morgan Stanley, also entered into consent orders with the 
Federal Reserve that required a foreclosure review for deficient 
practices in mortgage loan servicing and foreclosure processing. 

[12] United States v. Bank of America Corp., No. 1: 12-CV-00361 
(D.D.C. Apr. 4, 2012). The participating servicers were: Ally 
Financial (GMAC Mortgage), Bank of America, Citibank, JP Morgan Chase, 
and Wells Fargo. 

[13] For more information on the foreclosure review process, see GAO, 
Foreclosure Review Opportunities Exist to Further Enhance Borrower 
Outreach Efforts, [hyperlink, http://www.gao.gov/products/GAO-12-776] 
(Washington, D.C.: June 29, 2012) and Foreclosure Review: Lessons 
Learned Could Enhance Continuing Reviews and Activities under Amended 
Consent Orders, [hyperlink, http://www.gao.gov/products/GAO-13-277] 
(Washington, D.C.: Mar. 26, 2013). 

[14] Mortgage Assistance Relief Services, 75 Fed. Reg. 75092 (Dec. 1, 
2010); 12 C.F.R. § 1015. 

[15] 12 C.F.R. § 1015.7(a). 

[16] 12 C.F.R. § 1015.7(b). 

[17] See Mortgage Acts and Practices--Advertising (Regulation N); 
Mortgage Assistance Relief Services (Regulation O), 76 Fed. Reg. 
78130, 78134-38 (Dec. 16, 2011). Although FTC retains enforcement 
authority for the MARS rule, its rulemaking authority relating to the 
MARS rule, along with a number of other consumer financial protection 
laws, was transferred to CFPB, effective July 21, 2011, under the Dodd-
Frank Act. Pub. L. No. 111-203, §§ 1061(b)(5), 1097, 124 Stat. 1376, 
2036-37, 2102 (12 U.S.C. § 5581, 15 U.S.C. § 1638 note). 

[18] See Ariz. Rev. Stat. §§ 44-1378 (2010 Ariz. ALS 143); Cal. Civ. 
Code § 2944.7, §§ 2945-2945.11; Fla. Stat. § 501.1377; 765 Ill. Comp. 
Stat. Ann. 940/1-999; 24 Ind. Admin. Code. §§ 5.5-1-1 - 5.5-6-6; N.Y. 
Real Prop. Law § 265-B. 

[19] Mortgage Assistance Relief Services, 75 Fed. Reg. 75092, 75099 
(Dec. 1, 2010). At the time the final MARS rule was issued in 2010, 
FTC reported that at least 30 states and the District of Columbia had 
enacted statutes or regulations to address MARS-related practices. Id. 
Additionally, states may bring enforcement actions under the MARS rule 
against mortgage-assistance operations. 12 C.F.R. § 1015.10. 

[20] [hyperlink, http://www.gao.gov/products/GAO-10-787]. 

[21] According to FTC officials, the entities that submitted 
foreclosure rescue schemes complaints to the database were: LMSPN, 
Better Business Bureaus, CFPB, FFETF, Internal Revenue Service, 
California Attorney General, Idaho Attorney General, Indiana Attorney 
General, Iowa Attorney General, Maryland Department of Labor Licensing 
and Regulation Enforcement Unit, Michigan Attorney General, Montana 
Attorney General, Oregon Department of Justice, South Carolina 
Department of Consumer Affairs, Los Angeles County Department of 
Consumer Affairs, and the Consumer Fraud Unit of Orange County, 
Florida. 

[22] According to Lawyers' Committee and Homeownership Preservation 
Foundation representatives, the Homeowner's HOPE Hotline's team 
dedicated to addressing foreclosure rescue schemes experienced a lack 
of funding in early 2012. This gap in funding may have contributed to 
the decrease in complaints submitted to the Consumer Sentinel Network 
in 2012. 

[23] Despite the general increase in these complaints, they represent 
a small proportion of all consumer complaints in the database, 
accounting for roughly 1 percent or less of all complaints in each of 
these years. 

[24] In 2009, 72.6 percent reported a dollar amount; in 2012, roughly 
46.5 percent reported this information. According to FTC officials, 
all complaint information in the Consumer Sentinel Network is 
submitted by consumers and is unverified. 

[25] The number of partners in the LMSPN was current as of March 2013, 
but continues to grow as more government and nongovernment 
organizations join. 

[26] FTC v. Consumer Advocates Group Experts, LLC, No. 2: 12-CV-04736 
(C.D. Cal. May 30, 2012). 

[27] Id. 

[28] Id. 

[29] In a mass joinder lawsuit of the type discussed in foreclosure 
rescue schemes, multiple parties with claims arising from the same or 
similar transactions are pooled as co-plaintiffs. 

[30] FTC v. Lakhany, No. 8: 12-CV-00337 (C.D. Cal. Mar. 5, 2012). 

[31] Id. 

[32] Id. 

[33] 12 C.F.R. § 1015.7(a). 

[34] Mortgage Assistance Relief Services, 75 Fed. Reg. 75092, 75106, 
75127 (Dec. 1, 2010). 

[35] FTC v. Freedom Companies Marketing, Inc., No. 1: 12-CV-05743 
(N.D. Ill. July 23, 2012). 

[36] A reverse mortgage is a loan that converts the borrower's home 
equity into payments from a lender and typically does not require any 
repayments as long as the borrower continues to live in the home. 
These loans are available to homeowners 62 and older and have become 
an increasingly popular financial tool for seniors. See GAO, Reverse 
Mortgages: Product Complexity and Consumer Protection Issues 
Underscore Need for Improved Controls over Counseling for Borrowers. 
[hyperlink, http://www.gao.gov/products/GAO-09-606] (Washington, D.C.: 
June 29, 2009). 

[37] The Hardest Hit Fund is a Treasury program that provided $7.6 
billion to the 18 states hardest hit by recent housing and economic 
downturns, plus the District of Columbia, to develop locally-tailored 
programs to assist struggling homeowners in their communities. The 
Emergency Home Loan Program is a HUD program that provided declining 
balance, deferred payment loans to homeowners in states not covered by 
the Hardest Hit Fund. 

[38] CFPB v. Najia Jalan (d/b/a National Legal Help Center), No. 8: 12-
CV-02088 (C.D. Cal. Dec. 3, 2012). 

[39] Id. 

[40] Complaints received by the Homeowner's HOPE Hotline are submitted 
to the LMSPN complaint database, which submits its complaint data to 
FTC's Consumer Sentinel Network. 

[41] [hyperlink, http://www.gao.gov/products/GAO-07-418T]. 

[42] For example, see [hyperlink, 
http://www.gao.gov/products/GAO-07-418T], 8(a) Program: Fourteen 
Ineligible Firms Received $325 Million in Sole-Source and Set-Aside 
Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-425] 
(Washington, D.C.: Mar. 30, 2010); and Low-Income Home Energy 
Assistance Program: Greater Fraud Prevention Controls Are Needed, 
[hyperlink, http://www.gao.gov/products/GAO-10-621] (Washington, D.C.: 
June 18, 2010). 

[43] The 2012 and 2013 MFWG strategic scorecards were created in 
response to our 2010 recommendation that DOJ develop a comprehensive 
strategy for FFETF's Mortgage Fraud Working Group's efforts to combat 
mortgage fraud by developing clear, long-term strategies and 
performance measures that the working group can use to evaluate its 
progress toward achieving its long-term goal of increasing enforcement 
in the area of mortgage fraud. See [hyperlink, 
http://www.gao.gov/products/GAO-10-787]. 

[44] FFETF, First Year Report: Financial Fraud Enforcement Task Force 
2010 (Washington, D.C.: 2010). 

[45] Compiling complaint data and establishing mechanisms to identify 
the existence of fraud are detection efforts associated with federal 
government standards for internal controls. See GAO, Standards for 
Internal Control in the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[46] By the end of 2012, 13 states had begun reporting complaint 
information to the Consumer Sentinel Network, but the 14TH state was 
added in January 2013. 

[47] DOJ originally announced the results of the Distressed Homeowners 
Initiative in October 2012. DOJ initially reported that more than 200 
companies were shut down and criminal charges were filed against 530 
defendants as a result of the sweep. DOJ also reported that the cases 
involved losses of more than $1 billion from more than 73,000 victims 
across the country. However, in response to questions being raised 
about their report and an extensive review of the reported cases, DOJ 
found that the October 2012 public announcement overstated the number 
of defendants that should have been included as part of the Distressed 
Homeowner Initiative, as well as the corresponding estimated loss 
amount and number of victims. Specifically, DOJ found that the 
original figures included not just criminal defendants who had been 
charged in fiscal year 2012, as reported, but also a number of 
defendants who were the subject of other prosecutorial events--such as 
a conviction or sentence--in fiscal year 2012. In addition, the 
original announcement included a number of defendants who were charged 
in mortgage fraud cases in which the victim(s) did not fit the narrow 
definition of distressed homeowner that the initiative targeted. 

[48] The National Fair Housing Alliance is a national organization 
dedicated to ending discrimination in housing through leadership, 
education and outreach, membership services, public policy 
initiatives, advocacy, and enforcement. The National Community 
Reinvestment Coalition seeks to increase fair and equal access to 
credit, capital, and banking services and products for low-and 
moderate-income communities. HOPE NOW is an alliance between 
counselors, mortgage companies, investors, and other mortgage market 
participants that seeks to maximize outreach efforts to homeowners in 
distress to help them stay in their homes. The Homeownership 
Preservation Foundation is a nonprofit group that helps financially 
challenged homeowners navigate budget problems and avoid foreclosure. 
The Lawyers' Committee for Civil Rights Under Law is dedicated to 
securing equal justice for all through the rule of law, targeting in 
particular the inequities confronting African Americans and other 
racial and ethnic minorities. NeighborWorks America was established 
under Title VI of the Housing and Community Development Amendments of 
1978, Pub. L. No. 95-557, 92 Stat. 2080, 2115, as a congressionally 
chartered nonprofit organization dedicated to improving distressed 
communities. 

[49] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[50] For example, see GAO, Hurricanes Katrina and Rita Disaster 
Relief: Prevention Is the Key to Minimizing Fraud, Waste, and Abuse in 
Recovery Efforts, [hyperlink, http://www.gao.gov/products/GAO-07-418T] 
(Washington, D.C.: Jan. 29, 2007). 

[End of section] 

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