LOS ANGELES, CA — Attorney General Eric Holder, Housing and Urban Development (“HUD”) Secretary Shaun Donovan, FBI Associate Deputy Director Kevin L. Perkins and Federal Trade Commission (FTC) Chairman Jon Leibowitz announced the results of the Distressed Homeowner Initiative, the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners.
The yearlong initiative, organized by the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, resulted in 530 criminal defendants charged in 285 federal cases filed in U.S. District Courts across the country. These cases involved more than 73,000 homeowner victims and total losses by those victims are estimated by law enforcement at more than $1 billion.
From October 1, 2011 to September 30, 2012, the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments. Typically, the con artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage, or transferring title in the home to persons in league with the con artist. In the end, the homeowner can lose everything. Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after falsely promising that they would negotiate more favorable mortgage terms on behalf of the homeowners.
“These comprehensive efforts represent an historic, government-wide commitment to eradicating mortgage fraud and related offenses,” said Attorney General Eric Holder in announcing the national initiative. “The success of the Distressed Homeowner Initiative, and the developments we announce today, underscore our determination to pursue these and other financial fraud criminals around the country.”
“Shameless con artists seeking to prey on homeowners in financial distress need to know that law enforcement is hot on their trail,” says United States Attorney André Birotte Jr. “The results of this initiative demonstrate that the combined resources of federal, state and local authorities will be brought to the table in a concerted effort to bring fraudsters to justice and protect the nation’s homeowners.”
FBI Acting Assistant Director in Charge, Timothy Delaney, said, “This initiative exemplifies the government’s commitment to holding accountable individuals who target Americans facing foreclosure with fraud, thereby victimizing the most vulnerable of homeowners. That commitment is shared by our partners at the IRS, SIGTARP, the Department of Housing and Urban Development, the Federal Trade Commission, the United States Postal Inspection Service, the Federal Housing Finance Agency, and others, including state and local law enforcement.”
In the Central District of California, two recently filed cases highlight the effort.
In the “21st Century” loan modification case, 11 defendants who worked at a Rancho Cucamonga-based business have been charged with allegedly offering bogus loan modification programs to financially distressed homeowners. It is alleged that as a result of the scheme – run out of 21st Century Real Estate Investment Corp. and several related companies in Rancho Cucamonga – more than 4,000 financially distressed homeowners lost at least $7 million in fees they paid to the company, and many homeowners lost their homes to foreclosure.
In the “Direct Money Source” foreclosure rescue scheme case, two of the managers at a Westwood-based mortgage brokerage company have been indicted on federal charges alleging a foreclosure avoidance and equity-skimming scheme that targeted distressed homeowners. According to the indictment in this case, the scheme led several mortgage lenders to disburse more than $15 million in loan proceeds – with nearly half of that being lost to the fraud conspiracy.
In federal civil actions involving distressed homeowner victims nationwide, the Justice Department’s U.S. Trustee Program, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB), protectors of the nation’s bankruptcy laws and federal consumer laws, filed 110 cases against 153 defendants in federal cases across the country, with more than 15,000 victims identified and losses estimated at more than $37 million. False or abusive filings in U.S. Bankruptcy Court are commonly used to execute foreclosure rescue scams. State Attorneys General also filed criminal cases against 58 defendants, with losses at more than $3 million, and also filed at least 104 civil enforcement actions against 125 defendants with losses to homeowners at approximately $5 million. Additionally, the Treasury Department’s Office of Financial Stability’s Antifraud Unit and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), in order to protect homeowners from fraudulent or confusing websites that misuse the Treasury seal and key TARP housing program names, such as the Home Affordable Modification Program, shut down or forced into compliance more than 900 mortgage rescue websites or web advertisers.
In order to protect struggling homeowners and increase the number of criminal enforcement actions made as part of this initiative, the members of the Mortgage Fraud Working Group were proactive and fully operational. The FBI generated new investigations by gathering victim complaint data from FTC databases and other sources, analyzed the data and distributed information of lead value to field offices from coast-to-coast. The FBI, together with HUD-OIG, also utilized sophisticated undercover operations to facilitate the development of federal distressed homeowner criminal cases. Further, the FBI led a surge consisting of several law enforcement agencies in southern California, where many foreclosure rescue scam operators are located, to develop investigations that could be prosecuted in various federal districts. Many of the investigations initiated as part of the Distressed Homeowner Initiative are ongoing and will result in additional enforcement actions in the future, including in the Central District of California.
The Distressed Homeowners Initiative was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force. The task force was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Chaired by Attorney General Eric Holder, the task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For more information about the Financial Fraud Enforcement Task Force, and to learn more about scams targeting homeowners, how to protect yourself from scams, or how to report fraud if you believe you have been a victim, please visit: www.stopfraud.gov.
