As foreclosures continue to plague cities across the nation, municipal leaders have access to new tools to protect homeowners from “foreclosure rescue” scams.
Last week, during National Consumer Protection Week, the Federal Deposit Insurance Corporation (FDIC) launched an initiative to prevent loan modification scams that promise false hope to homeowners at risk of foreclosure. Legitimate efforts to modify the terms of mortgages are being undermined by scams that purport to keep borrowers in their homes and protect credit reports in exchange for various fees. While these services may be legal, they can often be obtained for free through existing mortgage modification programs.
To help consumers avoid unnecessary foreclosures and to stop “foreclosure rescue” scams, the FDIC has created a foreclosure prevention tool kit available at www.fdic.gov/foreclosureprevention. The agency also sponsors a toll-free call center (1-877-275-3342), which directs consumers to legitimate counselors, mortgage servicers and state and federal law enforcement agencies.
NeighborWorks America, a network of more than 230 community development organizations across the country, is also helping cities prevent foreclosure scams through their “Loan Modification Scam Alert” campaign.
NeighborWorks coordinates the campaign with FDIC, the Department of Housing and Urban Development, the Federal Trade Commission, the Department of the Treasury, Fannie Mae, Freddie Mac, the Lawyers’ Committee for Civil Rights Under Law and other national, state and local partners to reach high-risk communities and populations often targeted for fraud activity, which include seniors, Hispanics, African-Americans and Asian Americans.
The campaign provides residents with information and a way to report scams at www.LoanScamAlert.org or by calling 1 (888) 995-HOPE. Information is available in English, Spanish, Chinese, Korean and Vietnamese. Cities can access foreclosure prevention campaign materials through the website.
Cities Promote Consumer Protection
Cities that have partnered with NeighborWorks on foreclosure prevention events include Columbus, Ohio; Homestead, Fla.; Kansas City, Mo.; Los Angeles; New York; Seat Pleasant, Md.; and Waco, Texas.
Last year, Los Angeles Mayor Antonio Villaraigosa and the Los Angeles City Council partnered with NeighborWorks and local, state and national agencies to host a public awareness event on foreclosure prevention. Held at City Hall, the event kicked off an education campaign to protect homeowners from loan modification scams and help them find trusted advice and report illegal activity to authorities. The faith-based community, financial institutions, the Federal Trade Commission, Los Angeles Neighborhood Housing Services Inc., and local homeowners with personal loan modification scam experience participated in the event.
Mayor Villaraigosa also announced a new city ordinance informing residents of their rights, increasing protections for those facing fraudulent mortgage loan modifications and imposing harsher penalties on scam artists.
Other cities have stepped up efforts to protect residents from financial traps, such as overdraft fees charged by financial institutions on debit purchases, ATM transactions and checks. According to the Center for Responsible Lending, more than 50 million Americans overdrew their checking accounts at least once in 2009, costing consumers more than $38 billion in fees.
Last week, the New York City Department of Consumer Affairs (DCA) reminded consumers that as of July 1, banks will no longer be allowed to automatically enroll customers into “courtesy overdraft” protection and encouraged financial institutions to offer transparent overdraft choices.
“Banks that automatically enroll customers in costly and unrequested services like overdraft are violating the most basic principles of a fair transaction — and soon will also be violating federal law,” said DCA Commissioner Jonathan Mintz.
Last year, DCA investigated nearly 5,500 consumer complaints and secured nearly $9.9 million in restitution for New Yorkers who were unfairly taken advantage of by businesses. DCA also created the NYC SafeStart Account, a low-cost ATM-based account that cannot be overdrawn.
As part of its Bank On Seattle-King County initiative, the City of Seattle surveyed financial institutions about their overdraft policies. Staff then created a directory (www.everyoneiswelcome.org/overdraft.php) of banks and credit unions that help customers avoid overdrafts by offering options such as automatic decline of sale if there are no funds in the account, free and default opt-out provisions, a link to a savings account to cover an overdraft and text messages and e-mail alerts if the customer has a low balance.
Details: For information about NLC programs to promote sustainable homeownership and consumer protections, contact James Brooks at brooks@nlc.org or Sarah Bainton Kahn at bainton@nlc.org.
http://www.nlc.org/articles/articleItems/NCW031510/ForeclosureScams.aspx