Three federal agencies and state Attorneys General are cracking down on foreclosure fraud. There’s plenty of it following the announcement of President Obama’s $75 billion plan to help homeowners. If only we had had this level of attention during the sub-prime mortgage debacle. In an interview on Bill Moyers Journal this weekend, University of Missouri professor and author William Black noted that in 2004 the Federal Bureau of Investigation publicly warned about “an epidemic of mortgage fraud, and if it was allowed to continue, it would produce a crisis at least as large as the Savings and Loan debacle.”
So why wasn’t anything done? After the 9/11 attacks, Black says, 500 white-collar crime specialists in the FBI (the folks who went after bad S&Ls in the early 90s) were moved to national terrorism duties. That’s understandable — except the Bush Administration refused to replace them. Virtually no one was watching the store as the mortgage industry — brokers, lenders, securitizers, investment bankers, ratings agencies — committed widespread fraud. You’ll also want to hear what Black has to say about Robert Rubin, Lawrence Summers and Phil Gramm aligning to block Brooksley Born, chair of the Commodity Futures Trading Commission, from regulating derivatives. (Other news reports say Alan Greenspan and Arthur Levitt also opposed Born.) Why are Rubin and Summers still advising President Obama? Can we sweep the rascals out already? How about having Born replace Summers? Click here to watch the interview.
While you’re at it, listen to this interview on National Public Radio’s Fresh Air, with Frank Partnoy, former derivatives trader at Morgan Stanley and author of Fiasco: Blood in the Water on Wall Street. The book was just reissued in paperback (and out of stock on Amazon). It’s a clear-eyed examination of what de-regulation run amok looks like.
I recently interviewed Robert Manning, professor at Rochester Institute of Technology and author of Credit Card Nation, about a wide range of scams. (I followed up on my March 19 post about the “Card Services” fraudsters in this Yahoo!Finance column, exposing how the scam works.)
Manning told me he’s seeing a couple different version of the foreclosure rescue scams. Watch out for services that demand an upfront fee to process your application for foreclosure relief. “Some companies are charging $300 a pop just to talk to someone over the phone,” he says. “The consumer really needs to be engaged with the service that’s being offered so they understand what it is the firm can do and what they can’t do. Are they simply collecting information and passing it on to someone else, who passes it on to someone else?” Someone seeking foreclosure relief should be engaged with the decision-maker he says. See this information from the Center for Responsible Lending to avoid scams and click here to find a certified housing counselor in your area.
If you’ve been scammed, tell your story and help warn others. You can comment here or email me at laura at laurarowley.com.