Working Together to Prevent Mortgage Fraud

By Arizona Attorney General Terry Goddard

AZR October 2009

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Although the economic crisis and Arizona housing prices appear to be bottoming out, thousands of families are still struggling to stay in their homes. Adding fuel to the fire, more than 120,000 additional mortgages in this state, known as payment option ARMs, are due to reset within the coming months. More homeowners than ever will face sharply higher monthly payments and possible foreclosure.

The federal government’s “Making Home Affordable” loan modification plan has not had much impact yet. An August status report showed many of the lenders with the biggest Arizona market shares have only single-digit rates of enrollment in the modification program. These statistics suggest that some companies simply have not made a good faith effort to work with distressed homeowners.

In reaction to the slow or confusing response from lenders, many homeowners are turning to people claiming to be loan modification "experts" who charge hefty up-front fees, but do nothing helpful.

My office has taken aggressive action to prevent and prosecute housing fraud. Most recently, I helped establish a new state-federal task force on mortgage enforcement. This task force is targeting phony mortgage rescue schemes, fraudulent loan modification offers, equity skimming and other unethical lending practices. Ten state Attorneys General, senior officials from the U.S. Department of Justice and three other federal agencies are working to put unscrupulous operators out of business and lawbreakers behind bars.

My office is also providing information to individuals in need of mortgage help, prior to the important step of meeting with their lender or a certified counselor at a HUD-approved counseling agency. We developed a workbook to help families understand the options available. It may be downloaded for free at our website, www.azag.gov.

But law enforcement alone cannot stop the scam artists. Preventing these frauds requires the assistance of real estate professionals. Here are a few tips for avoiding loan modification scams that I hope you will share with homeowners:

Be suspicious of any business that “guarantees” to stop the foreclosure process or lower the monthly payment.
Be wary of any offer that instructs them NOT to contact their lender, lawyer or credit or housing counselor. Contacting the mortgage company or a housing counselor is very important.
Be skeptical of any service that collects a fee prior to providing help.
Always read all paperwork prior to signing it.

By working together, we can provide homeowners with the best advice possible and help reduce the risk of foreclosure. Making consumers well-informed and leery of the false promises of scam artists can be the difference between keeping and losing a home.

Terry Goddard

If you know someone who believes he or she has been a victim of mortgage fraud, please contact the Attorney General's Office in Phoenix at 602.542.5763, in Tucson at 520.628.6504, or outside the Phoenix and Tucson metro areas at 1.800.352.8431. Homeowners can also file complaints online by visiting the Attorney General’s website, www.azag.gov.

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