Administration Pledges to End Housing Scams
Friday, September 18, 2009
The Obama administration vowed Thursday to squash scams targeting homeowners on the brink of foreclosure, reviving a five-month-old pledge as millions of borrowers remain at risk of losing their homes.
A group of high-ranking government officials, including Treasury Secretary Timothy F. Geithner, Attorney General Eric H. Holder Jr. and attorneys general from 12 states, met privately in Washington on the issue. It was a first meeting of its kind on the matter for federal and state authorities, who discussed methods for coordinating crackdown efforts, government officials said.
The discussions come as a growing number of companies are offering to help troubled borrowers work out deals with lenders, sometimes charging thousands of dollars in upfront fees. Lenders and consumer advocates complain that the firms are charging for a service that can be obtained free through a housing counselor. Federal officials say the services often do not bring results and, in some cases, are outright scams.
"A clear lesson of this financial crisis is that American consumers need better protection against fraud," Geithner said in a statement. "And while we will prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond."
The Federal Trade Commission is considering rules banning firms from charging upfront fees for such services. Some states already prohibit that practice. The agency has filed complaints against 22 companies since February 2008, accusing them of deceptive marketing practices that amounted to foreclosure rescue scams, agency officials said.
But Thursday's meeting did not come with any significant new pledges of resources to address the problem, and officials' comments closely echoed statements first made in April. Some of the firms that would be targeted by the crackdown have said that they are filling a hole left by overwhelmed nonprofits and lenders.
The effort also comes as the Obama administration is attempting to steer more borrowers into its $75 billion foreclosure prevention program, known as Making Home Affordable. The program has made modest progress, and government officials hope it will help 500,000 borrowers by Nov. 1. But millions of delinquent borrowers still need assistance and are struggling to get help from lenders.
"An unfortunate result of the country's current economic situation is the exponential increase in the number of disreputable companies and individuals eager to strip homeowners of their most valuable asset," said Maryland Attorney General Douglas F. Gansler, who attended the meeting.