Carolyn Murray was in trouble. The Bowie resident and information technology worker had lost her job as a result of the recession and was beginning to fall behind on her mortgage payments.
Around mid-2011, Murray, now 64, attended a seminar claiming to be sponsored by the Department of Housing and Urban Development. There she was given the name of an out-of-state law firm that might be able to help her.
“I hadn’t understood that a lawyer would be involved,” she says, “but they said, ‘This person will help you get a modification.’ ”
It seemed legitimate: Working through a lawyer sounded official, and Murray’s online research turned up a number of strong ratings for the firm. So she saved and borrowed the $4,000 required for the fee and turned it over to the company, which promised to act as a liaison between her and the bank.
Six months passed, but the company had done nothing for Murray — and had begun asking for more money. “They said they now needed to go into mediation with the bank,” she recalled. “They said, ‘We can’t do that unless you pay us another $7,000.’ Of course, I didn’t have that, so I couldn’t pay.”
Murray, it turned out, had been scammed.
She’s in good company: In the same way that the housing bubble produced several predatory lenders offering mortgages that were too good to be true, its successor, the foreclosure crisis, has led to a wave of rescue scams. Preying on desperate homeowners who are late on their mortgages, fraudsters tout their expertise and special connections with banks in guaranteeing that they will be able to help clients — for a price, of course.
Despite investigations by federal agencies and nonprofit organizations, the scams are common nationwide, particularly in areas hit hard by the housing crisis.
“There’s more illegitimate than legitimate help out there,” says Yolanda McGill, who works for the Lawyers’ Committee for Civil Rights Under Law and coordinates the national Loan Modification Scam Prevention Network. But gauging the motives of someone offering aid isn’t impossible, and consumer advocates say educating the public is their best weapon in a fight in which the bad guys have an overwhelming financial advantage.
Washington area struggles
Although foreclosures aren’t front-and-center news anymore, the region is still dealing with a high number of homeowners in hot water. In June, according to the Urban Institute, 7 percent of Washington-area homeowners with first mortgages were more than 90 days late on a payment or were in foreclosure proceedings — a number that has held fairly steady during the past two years.
Peter Spohn, a supervisory special agent for the FBI’s Washington field office, says several types of scams target troubled homeowners. A lawyer might claim that the initial mortgage process was conducted illegally and offer to sue on behalf of the homeowner, who pays legal fees but never sees any action. Or a real estate agent may offer to help sell the house of someone whose property is worth less than they paid for it but eventually pockets most of the payment.
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