Payment-option ARMs looming threat to U.S. homeowners, officials warn
OLYMPIA – Washington Attorney General Rob McKenna fears a rise in scam victims as struggling homeowners trying to tap legitimate payment relief programs are simultaneously solicited by charlatans. He said a meeting this morning between Obama administration officials and state attorneys general on mortgage fraud is further evidence that cross-agency cooperation is vital to protect homeowners.
“Consumer education is the new burglar alarm and state-federal cooperative enforcement is the deadbolt that will protect homeowners from today's crooks – fraudsters who claim to offer mortgage relief,” McKenna said.
McKenna, co-chair of a new State-Federal Task Force on Mortgage Enforcement, participated by phone in a roundtable discussion today organized by U.S. Treasury Secretary Tim Geithner. Also at the brainstorming table were Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, Federal Trade Commission (FTC) Chairman Jon Leibowitz, Financial Crimes Enforcement Network Director Jim Freis and attorneys general from 11 other states. They shared concerns about fraudulent business practices and a commitment to bolster coordination.
Attorneys general said they were encouraged to see an unprecedented number of agency heads willing to merge forces and devote their attention to addressing the states’ concerns.
McKenna said he was particularly troubled by Holder’s observation that we’re about to see a new wave of residential foreclosures as payment-option ARM loans reset and homeowners are unable to refinance.
But he found comfort in federal officials’ initiative to encourage lenders to reduce monthly payments for homeowners, as well as the FTC’s consideration of new advertising rules and a potential ban on upfront payments to companies that promote help for troubled borrowers.
Authorities emphasized that free help is available from government-approved housing counselors. Homeowners can locate free housing counselors at www.makinghomeaffordable.gov or by calling 1-888-995-HOPE. Washington state residents can contact www.homeownership.wa.gov or 1-877-894-HOME.
Also today, the Federal Bureau of Investigation announced that its mortgage fraud investigations have jumped by 63 percent in the past year. The FBI has more than 2,600 cases open; most involve losses of more than $1 million.
The Washington Attorney General’s Office has filed nine foreclosure-assistance actions since 2007. Additional investigations are underway.
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