KOHL HOLDS HEARING ON FORECLOSURE RESCUE SCAMS

WASHINGTON - Today U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-WI) held a hearing on the rise of financial scams across the country, the result of a sharp increase in foreclosures. Across the nation, foreclosures have increased by 95 percent in the past year. Foreclosure rescue scams target low-income and senior homeowners already facing a financial difficulty. Often these financial predators will claim that they can help "save" the home of a senior experiencing foreclosure, when in fact they plan to walk away with both the title and equity of the home. The hearing will review how rescue scams work, who they impact, and what the government can do to eliminate the scams. 

 

"The mortgage foreclosure crisis is real. Most communities across the country are experiencing both the primary and secondary effects," said Chairman Kohl. "We need to determine how federal and state governments can best protect seniors and other targeted populations from these ruthless financial predators."

 

Because foreclosure filings are public information, scammers target the already troubled homeowners, contacting them by phone or mail repeatedly with claims that they can "save" the home and help the homeowner remain in their residence. Often these financial predators lead the homeowner to believe that there are no other options and advise them not to contact their lender or seek legal advice. In the end, these predators walk away with both the title and equity of the home.

 

Senior homeowners are particularly vulnerable to rescue scams because many of them are on fixed incomes and rely on the equity in their homes as their primary financial asset. Seniors are also particularly attractive to financial predators because they tend to have a larger amount of equity in their homes. Additionally, older homeowners are also more likely to experience foreclosure in the first place because, according to a study conducted by AARP, seniors are three times more likely to have sub-prime mortgage loans than younger borrowers. The foreclosure rate for sub-prime loans is much higher than prime loans because they carry a much higher risk of default by the borrower.

 

Chairman Kohl announced that he would soon introduce legislation to help homeowners across the country avoid these foreclosure rescue scams, especially in states where no law exists to prohibit or regulate these practices. Kohl also acknowledged the plan recently announced jointly by the mortgage industry and administration to help seriously delinquent borrowers stay in their homes. "While this is a step in the right direction," Kohl said, "there are concerns that this help will not reach as many troubled homeowners as possible."

 

The hearing's first witness, Walter Malone, offered his personal experience as a rescue scam victim in Washington, D.C. His case was recently settled with the help of AARP and the attorneys at Hogan and Hartson. Catey Doyle, senior staff attorney with Legal Aid Society in Milwaukee, discussed her experience attempting to litigate cases on behalf of rescue scam victims and spoke to the difficulties she has faced in doing so. Thomas Perez, Secretary of Labor, Licensing and Regulations for the State of Maryland, portrayed the foreclosures rescue situation in Maryland, the limitations of their current state law, and how Maryland's proposed law differs. John Anderson testified on behalf of the National Association of Realtors, offering an industry perspective, and also talked about how the foreclosures in his area have impacted the community he serves. Rachel Dollar, representing the Mortgage Bankers Association, testified on the topic of lender responsibilities, fraud against the elderly, and challenges in shutting down schemes. Finally, Peggy Twohig, Associate Director of the Division of Financial Practices at the Federal Trade Commission (FTC), offered testimony about the FTC's role in preventing foreclosure rescue scams. 

 

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A webcast of the hearing will be available on the Committee webpage:  www.aging.senate.gov