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S. HRG. 110–532 

FORECLOSURE AFTERMATH: PREYING ON SENIOR 

HOMEOWNERS 

HEARING 

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

WASHINGTON, DC 

FEBRUARY 13, 2008 

Serial No. 110–21 

Printed for the use of the Special Committee on Aging 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

SPECIAL COMMITTEE ON AGING 

HERB KOHL, Wisconsin, Chairman 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

BILL NELSON, Florida 

HILLARY RODHAM CLINTON, New York 

KEN SALAZAR, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

CLAIRE McCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

GORDON H. SMITH, Oregon 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MEL MARTINEZ, Florida 

LARRY E. CRAIG, Idaho 

ELIZABETH DOLE, North Carolina 

NORM COLEMAN, Minnesota 

DAVID VITTER, Louisiana 

BOB CORKER, Tennessee 

ARLEN SPECTER, Pennsylvania 

DEBRA WHITMAN, Majority Staff Director 

CATHERINE FINLEY, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Herb Kohl ............................................................. 1 

Opening Statement of Senator Gordon Smith ....................................................... 67 

Opening Statement of Senator Blanche Lincoln ................................................... 69 

PANEL OF WITNESSES

Statement of Walter Malone, contractor, Malone and Malone Construction, 

Washington, DC ................................................................................................... 3 

Catherine M. Doyle, chief staff attorney, Civil Division, Legal Aid Society 

of Milwaukee, Milwaukee, WI ............................................................................. 7 

Thomas Perez, Maryland secretary, Department of Labor, Licensing, and 

Registration, Baltimore, MD ............................................................................... 18 

John Anderson, licensed realtor, Twin Oaks Realty, Minneapolis, MN; on 

behalf of the National Association of Realtors ................................................... 27 

Rachel Dollar, attorney and certified mortgage banker, Santa Rosa, CA; on 

behalf of the Mortgage Bankers Association ..................................................... 39 

Peggy Twohig, associate director, Division of Financial Practices, Federal 

Trade Commission, Washington, DC .................................................................. 52 

APPENDIX 

Prepared Statement of Senator Susan Collins ...................................................... 81 

Testimony submitted from BITS The Financial Services Roundtable ................ 83 

(III) 

(1) 

FORECLOSURE AFTERMATH: PREYING ON 

SENIOR HOMEOWNERS 

WEDNESDAY, FEBRUARY 13, 2008 

U.S. SENATE, SPECIAL COMMITTEE ON AGING

Washington, DC. 

The Committee met, pursuant to notice, at 10:30 a.m., in room 

SD–628, Dirksen Senate Office Building, Hon. Herb Kohl (chairman of the committee) presiding. 

Present: Senators Kohl, Lincoln, and Smith. 

OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN 

The CHAIRMAN. Good morning to everybody. I welcome you to our 

hearing this morning. 

We are going to commence the hearing. But I need to inform you 

that at 10:45 a.m. approximately, we are told there is a vote on the 

floor. When that occurs we will have to have a temporary recess, 

hopefully not for very long. 

This morning our Committee will focus on a new type of financial 

fraud that has sprung forth from our country’s mortgage crisis. 

As Americans strive for financial security in their later years, 

many are falling short. Perhaps their retirement dollars are not 

stretching as far as they had hoped for, or medical expenses are 

overwhelming them. 

Whatever the reason, more and more older Americans are falling 

behind on their mortgages, and they find themselves facing foreclosure. Across our Nation, foreclosures have increased by 95 percent in just the past year. 

Because foreclosure filings are public information, scammers target the already troubled homeowners, contacting them by phone or 

mail repeatedly with claims that they can help the homeowner stay 

in their home. These financial predators say that they can help 

‘‘save’’ the home of a person or family experiencing foreclosure. 

They create a sense of urgency and say that there are no other options. They tell the homeowners not to contact their lender or to 

seek legal advice. In the end, these predators walk away with both 

the title and equity of the home. 

Senior homeowners are particularly vulnerable to rescue scams 

because many of them are on fixed incomes and rely on the equity 

in their homes as their primary financial asset. They are also particularly attractive to financial predators because they tend to have 

a larger amount of equity in their homes. 

Older homeowners are also more likely to experience foreclosure 

in the first place because, according to a study conducted by AARP, 

2 

seniors are three times more likely to have subprime mortgage 

loans than younger borrowers. The foreclosure rate for subprime 

loans is much higher than prime loans because they carry a much 

higher risk of default by the borrower. 

The mortgage foreclosure crisis is real. Most communities across 

our country are experiencing both the primary and the secondary 

effects. 

In my own State of Wisconsin, over 17,000 homeowners filed for 

foreclosure in 2007, an increase of 131 percent from the year before. 

Recently, the mortgage giants joined the Administration in announcing a plan to help seriously delinquent borrowers stay in 

their homes. While this is a step in the right direction, there are 

concerns that this help will not reach as many troubled homeowners as possible. 

Today we will hear from a local man who was the victim of a 

foreclosure rescue scam. Thankfully, his case was recently settled. 

But this is a rarity. We will learn about why it is so difficult to 

litigate cases against these financial predators, and we will hear 

about limitations of current State and Federal laws. 

We will hear from the realtors and the mortgage bankers, who 

have seen the effects of the foreclosure crisis up close. Our witnesses will also highlight the steps that individuals must take to 

avoid foreclosure as well as to prevent being victimized if foreclosure is inevitable. 

Finally, we will hear testimony from the Federal Trade Commission about their programs designed to assist homeowners in crisis. 

We need to determine how Federal and State Governments can 

best protect seniors and other targeted populations from these 

ruthless financial predators. I am currently working on legislation 

that would help homeowners across the country avoid these foreclosure rescue scams, especially in States where no law exists to 

prohibit or to regulate these practices. 

We thank our witnesses for being here to take part in today’s 

hearing. At this time, I will introduce our panel of witnesses. 

Our first witness will be Mr. Walter Malone. Mr. Malone has 

lived in the Washington area since 1953. In 1960 he began a construction business with his brother, and he still works as a contractor under the trade name of Malone & Malone Construction. A 

devoted member of this community, Mr. Malone lives in Southeast 

Washington. 

Next, we will have Catey Doyle. Our second witness, Mrs. Doyle 

is not only the sister of Wisconsin’s Governor Jim Doyle, but she 

is also currently the chief staff attorney for the Civil Division of the 

Legal Aid Society of Milwaukee. She is the lead attorney for the 

A-LINE Project, which is Advocacy for Low-Income Neighborhood 

Equity, of the Legal Aid Society. She is supervising a comprehensive study of one recent foreclosure in Milwaukee. As a fellow Wisconsinite, of course, I welcome you, and we look forward to hearing 

from you. 

Thomas Perez, our next witness, is the secretary of Maryland’s 

Department of Labor, Licensing and Regulation. Secretary Perez is 

a nationally recognized consumer advocate and civil rights lawyer. 

He has spent over 12 years in public service, the bulk of which was 

3 

at the Department of Justice where he prosecuted and supervised 

some of the Department’s high-profile civil rights cases. He later 

served as Deputy Assistant Attorney General for Civil Rights 

under Attorney General Janet Reno. 

Next, we will have John Anderson. Mr. Anderson has been a licensed realtor with Twin Oaks Realty in Minneapolis since 1980. 

He has been recognized as the State Realtor of the Year. Mr. Anderson is a long-time proponent of sustainable home ownership and 

affordable housing finance programs. 

Next we will have Rachel Dollar. Ms. Dollar is a California attorney, a certified mortgage banker and a recognized expert in the 

mortgage lending industry. Ms. Dollar handles mortgage fraud litigation for lenders, and she supervised mortgage fraud and RICO 

litigation in the Federal courts. Furthermore, Ms. Dollar was recognized in each of the last 3 years by Inman News as one of the 100 

Most Influential Real Estate Leaders. 

Finally, we will be hearing from Peggy Twohig. Ms. Twohig is 

currently the associate director for the Division of Financial Practices at the Federal Trade Commission where she is responsible for 

overseeing enforcement of the FTC Act and other consumer protection laws. Ms. Twohig received her law degree from New York University School of Law and her master’s in public policy at the 

Woodrow Wilson School of Public and International Affairs. 

We welcome you all for being here today. 

We will start with testimony from Mr. Malone. 

STATEMENT OF WILLIAM MALONE, MALONE AND MALONE 

CONSTRUCTION, WASHINGTON, DC 

Mr. MALONE. Good morning, members of the Committee. 

My name is Walter Malone. I am 72 years old and have owned 

my home here in D.C. at 1606 A Street since 1994. I grew up in 

Sussex County, VA. I moved here in 1953. I have worked in the 

construction business all my life. I have owned my construction 

company in D.C. since 1960. I am married, the father of eight children; most of them are grown now. 

I bought my house for about $100,000. It is now worth about 

$400,000. In early 2002, I had a problem in my business. I had 

been working on a major job for several months but wasn’t getting 

paid at all because there was a problem with a lien on the property. Each week, I thought the payment would clear, but it didn’t 

clear soon enough. I got about 3 months behind in my mortgage 

payments and got a notice of foreclosure. 

I was looking into refinancing my mortgage and even into filing 

for bankruptcy, when I was visited one day by a man named Calvin 

Baltimore. Mr. Baltimore told me I didn’t need to refinance the 

mortgage. He promised that he could lend me the money to stop 

the foreclosure and do some repairs also on the house. He told me, 

‘‘That is what we are about—helping people.’’ 

Even though the offer sounded good, it was hard to understand. 

Mr. Baltimore promised that the house would stay in my name, 

and everything would stay just the same. At the same time he 

talked about how much I would have to pay to buy the property 

back. 

4 

I didn’t take Mr. Baltimore up on his offer right away. For one 

thing, my wife told me she didn’t trust him. I kept thinking the 

construction payment owed to me would come any day. I did consult with a bankruptcy attorney, and I learned that I could stop the 

foreclosure by filing bankruptcy. 

The week went by, and the pressure inside me built up. About 

a week before the foreclosure, Mr. Baltimore came back. He noticed 

the religious pictures on my wall. He told me he was a believer 

himself, that he had been a preacher, and his uncle was a preacher, a pastor in a church in Annapolis. This made me feel connected 

to him. I trusted him because he said he was a believer. He said 

things that made me feel like I would be doing something wrong 

if I filed for bankruptcy. He told me, ‘‘Don’t mess yourself up like 

that Mr. Malone.’’ 

As the foreclosure date got closer, the pressure built up on me. 

A week before the foreclosure, I signed some documents Mr. Baltimore gave me. A few days later, I signed some papers at the office 

of Vincent Abell. I learned later that one of the documents was a 

deed that signed my house over to Mr. Abell. But all Mr. Abell ever 

paid was about $10,000 to the mortgage company to catch up the 

mortgage. Even though the deed says he bought the house for 

$157,987.00, he gave me no money at all. 

The worst part was that, even though he was on the deed to my 

house, the mortgage was still in my name. The papers said I had 

to pay my mortgage payment plus a few hundred dollars more to 

Mr. Abell every month. They also said that, if I made all payments 

on time, I could buy the house back from Mr. Abell within a year 

for $215,000. 

I got lucky. The lawyers at AARP and Legal Counsel for the Elderly had a lot of folks come to them who had done the same kind 

of deal with Mr. Abell and Mr. Baltimore. The AARP lawyers 

joined up with lawyers from Hogan and Hartson. They represented 

me and five others, older homeowners, in a case against Mr. Abell, 

Mr. Baltimore, and others. All of us had all been through some 

hard times. One was a veteran of three wars who suffers from posttraumatic distress. One was a woman who had been in a bad car 

accident and suffered brain injury. Many of the others had been 

passed from one dishonest lending company to another. 

People’s homes are important. One of the folks in our case was 

born in the house they tried to take away from him. Most of the 

others have lived in their homes for 30 years or more. They raised 

their kids there and made their lives there. People like Mr. Abell 

and Mr. Baltimore make their living by hitting you when you are 

down, all the while pretending they are helping you. 

Like I said, I was lucky to get the help I got. I got to stay in my 

home. But others aren’t as lucky. 

I hope you in the Congress can pass laws to stop some of this 

bad lending and to stop people like Mr. Abell. People who have 

worked hard in their whole life should not have to fight this kind 

of thing just to hold on to their house. 

Thank you. 

[The prepared statement of Mr. Malone follows:] 

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The CHAIRMAN. Very fine testimony, Mr. Malone. Appreciate it. 

Mr. MALONE. Thank you, sir. 

The CHAIRMAN. Catey Doyle. 

STATEMENT OF CATHERINE M. DOYLE, CHIEF STAFF ATTORNEY, CIVIL DIVISION, LEGAL AID SOCIETY OF MILWAUKEE, 

MILWAUKEE, WI 

Mrs. DOYLE. Well, good morning, Mr. Chairman. Thank you for 

inviting me to testify today at this hearing regarding mortgage 

foreclosure rescue scams. 

I am the chief staff attorney at the Legal Aid Society of Milwaukee, and we represent many victims of these scams. As Mr. 

Malone pointed out, I consider our clients to be lucky because they 

have found their way to an attorney. Many of the victims do not 

find legal representation to help them through this morass. 

Mr. Malone’s testimony was very compelling. As you can tell, 

these rescue scammers are very good, and they know exactly what 

to say to people to get them to participate in the scam. I have seen 

many, many people who shouldn’t otherwise be gullible who are 

talked into these things by very good fast-talking people. 

Legal Aid Society saw its first case more than 2 years ago when 

an 83-year-old woman and her daughter, Yvonne and Susan 

Klermund, came to our offices complaining that they were being 

evicted from their home of 30 years. They were extremely distraught, but they were really unable to explain what had happened 

to them. Then the word ‘‘foreclosure’’ was used in the intake process, so the intake specialist came and got me. 

We began to ask more pointed questions and soon realized that 

we had on our hands our first case of rescue fraud. We have been 

litigating this case for more than two years, because these cases 

are very hard to litigate. They are also quite complicated to prosecute. We have been working extensively with State and Federal 

prosecutors on some of these cases, but they just take a long time, 

and they drag on. It is very hard for the victims to be able to right 

the wrongs or get themselves back in their house or relieve the 

stress that was caused by this lengthy litigation. 

Sadly, Yvonne, our client who was our first client, passed away 

on Christmas Day of 2007. Our trial is set for June this year, and 

I know for a fact that stress contributed to her death. 

The Klermund story is this: As with most of our clients, many 

of whom are senior citizens, they were in foreclosure, and they 

were very isolated and very paralyzed by their circumstances, and 

they had no idea where to go for help. They were just the perfect 

victims. 

Pamela Johnson, a rescue scammer, contacted them by mail and 

offered to help them stop a sheriff’s sale, get cash from their home 

and get a fresh start. Pamela came to their home and had them 

sign a number of documents including a power of attorney. There 

was no contract she had them sign, no explanation of what services 

she would perform or what her fees would be. 

After the Klermunds signed the documents—they trusted her 

though; she was a good talker; they did trust her—they didn’t hear 

from her for several months. When we investigated the matter, we 

discovered that actually Pamela had gone ahead and sold their 

8 

home, without their knowledge or consent, to a straw buyer she 

had recruited, because the straw buyer had good credit and could 

get a mortgage to finance the scam, and the two of them had kept 

$58,000—the entire net proceeds from the sale of the Klermunds’ 

home. 

The Klermunds got nothing—just as Mr. Malone. They were left 

penniless, without their home, without any savings to help them 

relocate, and now they were being evicted. So, so much for the 

fresh start that Pamela Johnson had offered them. 

Legal Aid has filed complaints bringing claims against Pamela 

Johnson for theft by fraud, theft by a fiduciary, intentional misrepresentation, violations of Wisconsin’s UDAP statues. We have 

brought claims also against the straw buyer for aiding and abetting 

in these claims, against the closing agent—and the closing agents 

in these cases, often title companies, I believe, are either very negligent or actually fully aware of the frauds and allow them to proceed. We have also had to bring in the lender from whom the straw 

buyer got a loan because they now have a lien against the 

Klermunds’ home. 

As I explained, these cases are very hard to litigate, and it is also 

hard to prove the damages because we have to educate the courts 

on that. Because the perpetrators say, ‘‘Well, it was, you know, no 

harm no foul. They were going to lose their house anyway, and all 

we are doing now at this point is, you know—they were going to 

lose it anyway, and they weren’t going to get the money anyway 

from their home, the equity out of their home.’’ 

So the goal here really has to be to take a look at what this is 

and to stop these scams before they occur. Because it is so much 

better for consumers to prevent the abuses from occurring than trying to go back and recover damages that may be long gone. It takes 

so many years, and living with the stress and the threat of homelessness or perhaps even homelessness is very hard. 

Wisconsin is close to passing a law that strictly restricts the activities of mortgage rescue scammers, and there are approximately 

16 States that have statues or are close to getting them passed, 

have bills introduced. We think that that is a very good state of 

affairs, that the States would regulate these things. However, 15 

States is not 50. So there are a lot of people left out there without 

anyone attempting to pass legislation or without laws that will assist them. 

So we really appreciate the fact that you are giving attention to 

this issue today and attempting to help consumers and attempting 

to prevent these scams before they occur. We hope that any legislation which might come of this would supplement the State statutes, 

most of which are very good, and explicitly preserving the rights 

that a person might have if they live in a State in which there is 

State law or the rights they might have under other laws, but as 

a supplement to that to help those not covered. 

I have made several recommendations in my written remarks, 

which I won’t repeat. But, again, thank you very much for allowing 

me to testify today on behalf of our clients and other people similarly situated. 

[The prepared statement of Mrs. Doyle follows:] 

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The CHAIRMAN. Thank you, Mrs. Doyle. That was important testimony. 

Mr. PEREZ. 

STATEMENT OF THOMAS PEREZ, MARYLAND SECRETARY, DEPARTMENT OF LABOR, LICENSING AND REGULATIONS, BALTIMORE, MD 

Mr. PEREZ. Good morning, Senator, it is a pleasure to be here in 

front of you. I am a former Judiciary Committee staffer for Senator 

Kennedy, and it is a pleasure to be in front of you. I am also an 

adopted Wisconsinite; my in-laws live in Wauwatosa, and my children’s favorite time of the summer is always the 2 weeks in 

Marinette County at the cabin. So it is a pleasure to be here in 

front of you. 

I have the privilege of serving as the secretary of the Department 

of Labor, Licensing and Regulation, in Maryland. Among other 

things, we charter all the State-chartered institutions in Maryland, 

and we oversee the activity of the mortgage industry in Maryland. 

As you well know, the regulation of the mortgage industry will 

always be a joint venture between the States and the Federal Government. Seventy percent of the loans originated in Maryland are 

subject to State regulation, while 30 percent are originated by federally chartered institutions and, therefore, are preempted by Federal law. So it always has to be a joint venture. 

The foreclosure bug has indeed bitten Maryland, as it has the 

rest of the country. We had roughly 3,000 foreclosure events in 

2006 and 23,000 in 2007. So we have certainly fallen prey to that. 

Again, it is a problem that is disproportionately affecting the 

communities of color and the elderly, and that is because it is predominantly, as you correctly identified, a subprime phenomenon. 

Fifty-three percent of African Americans are in subprime loans in 

Maryland, 46 percent of Latinos, 18 percent of nonminorities. 

Twenty-five percent of subprime borrowers were older than 55, 

compared with 14 percent of prime borrowers. 

So the elderly and people of color have a bull’s-eye on their back, 

regrettably. That is what we have been working very vigilantly on. 

I co-Chair the Governor’s Home ownership Preservation Task Force 

and, indeed, sustainable home ownership is our goal here. 

Rather than describing some of the specific scams—because Mr. 

Malone really did it quite eloquently, as did Mrs. Doyle—I know 

I try to put myself in your shoes. What I would really like to talk 

about is what we are doing and what I would respectfully recommend that the Congress do. 

We have seen a proliferation in scams. Again, as you correctly 

pointed out, they target people who have equity. Many elderly people are cash poor and house rich, and so they have a bull’s-eye on 

their back. We have case after case after case of—I wish they had 

the ending that Mr. Malone had. The majority of the people that 

we deal with do not have that ending. 

We are working with the Feds right now on what I believe will 

be the largest rescue scam case in the Mid-Atlantic region involving over 100 victims. So it is very real. It is affecting people who 

are upper-middle class; it is affecting people who are lower-middle 

19 

class; it is affecting people across economic lines as well as age 

lines. 

We are one of the States that have some protections. In 2005 we 

passed a bill called the Protection of Homeowners in Foreclosure 

Act—the acronym is PHIFA. It contained a number of consumer 

protections and a number of disclosure requirements. It has been 

a good start. I must candidly admit: It is not enough. Part of the 

Governor’s robust and aggressive package of reforms includes one 

provision that I want to highlight here. 

Because what ends up happening to Mr. Malone and others is 

they are exceedingly vulnerable. The phone rings, or the letter 

comes in the mail with an offer that sounds too good to be true, 

and that is because it is. That is that person who is indeed the 

scam artist that Mr. Malone and Mrs. Doyle described. One of the 

things that happens is they sign 40 documents. I am a lawyer; I 

don’t read the documents. I shouldn’t admit that, probably, in public, but that is just the nature of life. One of those documents that 

they invariably sign is a quitclaim deed to their home. They have 

just become a renter. 

What we are doing in Maryland—that transaction is inherently 

fraught with potential for abuse. So in our package of reforms that 

we are proposing, and that I expect will pass the Maryland General 

Assembly in the next month, one of the provisions is to actually 

ban the conveyance of a home in the rescue context. Because I have 

yet to encounter a situation that wasn’t fraught with fraud. The 

scam artist who says, ‘‘Don’t worry. When your situation gets better, I will let you get the home back,’’ that is baloney—it doesn’t 

happen. The only way, in our judgment, to regulate this practice 

is to ban it, with certain commonsense exceptions. 

So we are about to become the second State to actually ban that 

conveyance. If you don’t ban it, what you end up doing is you have 

situations like the Legal Aid Bureau and others coming in after the 

train wreck has occurred. They are a renter; you are trying to prevent somebody from being evicted as opposed to keeping someone 

in their home. Disclosure is not enough, I have concluded after 

way, way, way too many stories. 

In conclusion, I wanted to just highlight a few recommendations. 

If I were in the shoes of a member of this august body, what would 

I be doing? 

First of all, I would respectfully request that you take a very 

careful look at the proposed acquisition of Countrywide by Bank of 

America. Currently, we have many Marylanders—and I am confident there are many Wisconsinites—who are now in the soup as 

a result of a loan that they had with Countrywide. 

I am very concerned as a result of this acquisition that States 

will be preempted from protecting consumers who are victims of 

foreclosure activity. So I would respectfully and strongly encourage 

you to take a close look at that. If it is approved, which I expect 

it will be, that there be some provisions which continue to allow 

States to protect their residents who had Countrywide mortgages 

and who may be now preempted as a result of that acquisition. 

Second, I encourage you to continue the efforts to assist in building nonprofit capacity. As Mrs. Doyle correctly pointed out, we need 

to prevent things. The Prevention of Homeowners in Foreclosure 

20 

Act, that is when the train wreck is about to happen. We need to 

prevent these things from happening. We have too few people in 

our communities, in Maryland and Wisconsin and elsewhere, who 

are out there advocating for people like Mr. Malone. 

What we need is that strong cadre and an infrastructure of nonprofit housing counselors who have no dog in the fight—they have 

no financial stake in the outcome. The only thing they are looking 

out for is the best interest of the consumer. Nationally we don’t 

have that infrastructure. NeighborWorks America and others are 

doing great work, but we need to do more, plain and simple. I 

think the Federal Government can do a lot. 

There are some bad products on the market. There should not be 

the marketing of these risky ARMs to seniors. I know of one entity 

that has been doing just that. I encourage the Federal Government 

to play a very aggressive role in overseeing these products, because 

a senior who is living on a fixed income has no business getting in 

on of these risky ARMs. I am sure you are aware in the context 

of reverse mortgages that there is a counseling requirement before 

you can reverse mortgages. 

At a minimum, if we are going to allow these products to continue to exist, we need to be very aggressive in overseeing how 

those products are implemented. Because I sure wouldn’t want to 

put an elderly relative of mine into a risky ARM product when they 

are living on a fixed income and the price of gas and the price of 

electricity and everything else is going through the roof. 

Finally, two final quick thoughts. No. 1, it is critically important 

to continue to shine a light on the role of the mortgage servicer. 

These are the folks who collect the payments, and these are the 

folks who negotiate when you fall behind. As I am sure you are 

aware, there was a study by Moody’s documenting that one percent 

of people in danger of foreclosure are having meaningful modification. Whereas there is another study from the Center for Responsible Lending showing that 70 percent of people in foreclosure 

could keep their home if they had meaningful modification. 

What we are seeing is that seniors are trying to pick up the 

phone, if they know who to call, and they can’t get through because 

servicers are overwhelmed. Servicers are, frankly, not regulated at 

a Federal level. There needs to be much more aggressive oversight 

than there has been to date. 

Finally, I believe it is critically important to simply aggressively 

enforce the laws that are on the books and to ensure that the 

States have the authority to enact laws. I am a firm believer in 

what I call redundancy in law enforcement, and we need redundancy in law enforcement. The States need to have an important 

role. The Feds need to play an important role. Because at any 

given moment laws are only as good as the political will of those 

enforcing them. Without that redundancy, we cannot get the job 

done in this joint venture between the Feds and the States of protecting people. 

So thank you for your time. I appreciate your leadership. 

[The prepared statement of Mr. Perez follows:] 

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The CHAIRMAN. Thank you. Thank you for your testimony. We 

appreciate it. 

Mr. ANDERSON. 

STATEMENT OF JOHN ANDERSON, LICENSED REALTOR, TWIN 

OAKS REALTY, MINNEAPOLIS, MN, OF BEHALF OF THE NATIONAL ASSOCIATION OF REALTORS 

Mr. ANDERSON. Chairman Kohl, thank you very much for inviting me to testify today. 

I am a licensed real estate broker with Twin Oaks, and I have 

been doing this, been a realtor, for over 30 years. I have assisted 

and counseled thousands of buyers and sellers over the years as a 

residential broker and salesperson, including those facing the foreclosure situation just like Mr. Malone. 

Realtors want to protect our Nation’s homeowners. We are troubled by the proliferation of foreclosures and the scam artists who 

are preying on the most vulnerable homeowners, including older 

Americans. 

Today there are more than 87 million Americans over the age of 

50. According to NAR research, 43 million Americans age 50 and 

over own their home and have been a homeowner for more than 

20 years. The typical older boomer household has more than 

$100,000 in home equity. Yet when describing their financial situation, almost half of older homeowners report concerns about their 

financial security. For those on a fixed income, a spike in just one 

monthly expense or an unexpected significant cost transforms older 

boomers into the most vulnerable population in the eyes of abusive 

lenders and foreclosure scammers. 

As we sit here today, my home State of Minnesota has seen foreclosure filings almost double since 2006. Minneapolis and St. Paul, 

where I work, just last month reported 711 homes lost to foreclosure, which has increased from 560 in October. In fact, in the 

last week I drove down a two-block neighborhood, and I counted 15 

homes in foreclosure, both boarded up and abandoned. There is a 

chart that will show you the foreclosures. 

Someone once said that foreclosures are like mold: Once it starts, 

it is difficult to get rid of a community of them. Families struggling 

to make mortgage payments and who live in a neighborhood where 

homes have already been lost to foreclosure will find it difficult to 

refinance or sell due to decline in area home values. Far too often 

the financially stressed family will end up losing their home and 

feeding the vicious proliferation of foreclosures. 

Since you have already heard from some of the witnesses about 

different types of fraudulent foreclosure rescues, I would like to 

take a minute to talk about what my State has done to make Minnesota less attractive for scammers. 

In 2004 the State enacted a law that sets forth a series of complex requirements applicable to persons who offer to help to stop 

or postpone a foreclosure. Minnesota requires that the services of 

foreclosure consultants be detailed in a written contract and must 

include a consumer notice stating that the consultant cannot ask 

the homeowner to sign a deed, lien or mortgage. On the monitor 

you will see a copy of that disclosure. 

28 

Another important provision in our State foreclosure law is the 

additional right of the homeowner who engages the services of a 

foreclosure consultant to cancel the contract for services within 

three business days. This statute requires that a separate notice of 

cancellation be attached to each contract. I have seen this work 

and be something that happens. 

In order for a foreclosure rescue scam to be successful, the ‘‘counselor’’ cuts off the homeowner’s access to all legitimate foreclosure 

prevention options. For older Americans who have been in their 

home for more than 20 years who do not want to seem like a burden on their family members and who do not understand their 

available options, the foreclosure rescue seems like a great option, 

and the counselor seems like they really want to help. But as we 

know, these predatory rescues are the worst option, and by some 

measures even more terrible than a foreclosure where equity in the 

home is returned to the borrower after the mortgage debt is paid. 

Similar to Mr. Perez, I agree: Just the laws are not enough. It 

is critical that mortgage mitigation options be widely advertised, 

especially in areas where we know that rescue scammers like to operate. NAR strongly believes the private sector has an obligation to 

help inform homeowners about foreclosure prevention. Last May, 

NAR partnered with CRL and NeighborWorks on a brochure, 

which I have here and have available, that focuses on helping financially stressed homeowners understand their options and offers 

advice on how to avoid foreclosure. The brochure also promotes the 

1–888–995–HOPE number, which directly connects homeowners 

with a trained counselor at HUD-certified nonprofit counseling 

agencies. 

Rarely do foreclosure scams turn out with a happy ending. Rather, the rescue scenario that is played out over and over in communities across this country is in reality the theft of families’ wealth, 

the taking of a homeowner’s dignity and stolen home ownership. 

For older Americans who rely on their home as the foundation of 

their net worth, this is emotionally and financially crippling. 

In conclusion, as a realtor who for many years, like my father before me, has worked hard to help Americans achieve the dream of 

ownership, I believe now it is the time, the duty and the duty of 

our industry as well as everyone touched by this crisis to help 

homeowners protect their dream and the financial security a home 

brings. 

NAR stands ready to work with Congress on the important issue 

of foreclosure rescue scams, and we are happy to make available 

to your constituents our foreclosure prevention brochure and any 

other materials. 

Thank you very much. 

[The prepared statement of Mr. Anderson follows:] 

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The CHAIRMAN. Thank you very much, Mr. Anderson. 

The vote just started, so we will recess now for perhaps 10 minutes. I will get back just as soon as I can. [Recess.] 

Ms. Dollar, we would like to hear your testimony. 

STATEMENT OF RACHEL M. DOLLAR, ATTORNEY AND CERTIFIED MORTGAGE BANKER, SANTA ROSA, CA; ON BEHALF 

OF THE MORTGAGE BANKERS ASSOCIATION 

Ms. DOLLAR. Thank you, Chairman Kohl, for the opportunity to 

discuss foreclosure rescue scams. 

The Mortgage Banking Association believes it is important to 

protect homeowners, especially the elderly, from scams that can result in the loss of people’s primary financial asset—their home. The 

impact of frauds, scams and deceptive practices on the elderly can 

be both psychologically and financially devastating. 

The current increase in foreclosures around the country heightens the concern that borrowers may be lured by bogus offers of 

help, particularly in the case of older homeowners who may be targeted by fraudsters. 

Escalating foreclosures also provide criminals with the opportunity to exploit and defraud vulnerable homeowners. A foreclosure 

rescue scheme often involves forged or fraudulent deeds. In extreme circumstances, perpetrators sell the home or secure a cash 

out loan without the homeowner’s knowledge, stripping equity for 

personal enrichment. 

In my professional experience, one of the most common frauds is 

a sale and leaseback transaction, where the homeowner is instructed to transfer the property to a third party. The homeowner 

is told that the rescuer will pay off the mortgage and will lease the 

property back to the homeowner. The phony rescuers then have 

title to the home, fail to pay off the existing mortgage and place 

additional mortgages against the property, stripping out any equity 

that may have existed. 

Another significant scheme that involves seniors is real property 

theft, which is targeted at properties with stable ownership histories, typically those owned by older Americans. Unscrupulous 

contractors also approach elderly homeowners offering to obtain 

loans and make home repairs. 

Homeowners in distress seldom seek assistance from a HUD-approved counseling agency or from their mortgage company, the entity that is best suited to provide a workout. 

The best assistance senators can offer to stop foreclosure rescue 

scams is to educate constituents who find themselves in financial 

difficulty to call their loan servicer or the HOPE hotline at 1–888– 

995–HOPE. It is extremely important for people to know that the 

HOPE hotline is a free service. We have become aware of impostor 

services looking to scam troubled borrowers. 

Although there are no precise statistics available on the extent 

or cost of mortgage fraud, the Department of Treasury’s Financial 

Crimes Enforcement Network reported that suspicious activity reports, or SARs, related to mortgage fraud increased almost 400 percent from 2003 to 2006. The FBI has also seen its mortgage fraud 

casework increase over 235 percent and estimates financial losses 

40 

to the mortgage industry for 2006 between $946 million and $4.2 

billion. 

MBA is proactively working with law enforcement in an effort to 

curb mortgage fraud crimes. On March 8, 2007 MBA signed a 

memorandum of agreement with the FBI to promote the FBI’s 

Mortgage Fraud Warning Notice. The Notice States that it is illegal 

to make any false statements regarding income, assets, debt or 

matters of identification, or to willfully inflate property value to influence the action of a financial institution. 

MBA continues to advocate for increasing the investigation and 

prosecution of mortgage fraud by law enforcement agencies and improving the communication between mortgage lenders and State 

and Federal agencies. To that end, MBA requests Congress appropriate $6.25 million per year, over a 5-year period, of dedicated 

funding for the FBI efforts in tracking down and prosecuting mortgage fraud. 

To protect a borrower from becoming a victim of a foreclosure 

rescue or bailout scheme, MBA recommends consumers keep the 

following six points in mind: 

If it sounds too good to be true, it probably is. 

Beware of offers to ‘‘save’’ homeowners from default or foreclosure. 

If you are having trouble, contact your mortgage servicer or call 

888–995–HOPE. 

Make every effort to understand the papers and forms being presented. 

Never sign any loan documents that contain blanks. 

Make sure the servicer is fully aware of and approves any transfer of title to the property. 

Thank you for the opportunity to testify. MBA looks forward to 

working with the Committee. 

[The prepared statement of Ms. Dollar follows:] 

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The CHAIRMAN. Thank you very much, Ms. Dollar. 

Ms. TWOHIG. 

STATEMENT OF PEGGY TWOHIG, ASSOCIATE DIRECTOR, DIVISION OF FINANCIAL PRACTICES, FEDERAL TRADE COMMISSION, WASHINGTON, DC 

Ms. TWOHIG. Chairman Kohl, I am Peggy Twohig, associate director of the Division of Financial Practices at the Federal Trade 

Commission. I appreciate the opportunity to appear before you to 

discuss what the FTC is doing to address foreclosure rescue scams. 

In the past year, as you noted, there has been a sharp increase 

in delinquencies and foreclosures. There were 75 percent more foreclosure filings in 2007 than in 2006. Unscrupulous actors, therefore, now have more opportunities to take advantage of people facing serious financial hardship. 

Although foreclosure rescue scams take various forms, as you 

have heard, at the heart of each is a false promise that the rescuer 

will save the consumer’s home. The Commission, partnering with 

other Federal agencies and State and Local Governments, is working to address the problem of foreclosure rescue frauds through law 

enforcement and consumer outreach. 

I will briefly describe the FTC’s authority in the financial arena, 

the nature of foreclosure frauds, and recent activities to protect 

consumers from these frauds. 

The Commission has wide-ranging responsibilities regarding consumer financial issues. In particular, the FTC enforces Section 5 of 

the Federal Trade Commission Act, which prohibits unfair and deceptive acts and practices in commerce. The FTC protects consumers from unfair and deceptive practices at every stage of the 

consumer credit lifecycle—from the advertising and marketing, 

through the loan servicing, through the debt collection—and, unfortunately, foreclosure occurs at the end of the lifecycle for many consumers. That is where foreclosure rescue scams step in. 

Foreclosure rescue frauds take many different forms, as you have 

heard, and I won’t go into detail here because you have heard this 

already from other panelists. But there are some common types. 

In some scams the homeowner is told that he is signing documents for a new loan when, in fact, he unknowingly signs over the 

deed to his house. 

In another type, the homeowner knows he is signing over title to 

his house based on promises that he will be able to stay as a renter 

and get the house back, repurchase it later. However, rather than 

allowing the homeowner to repurchase the property, the rescuer 

typically asserts ownership outright and evicts the homeowner. 

Or rescuers sometimes promise various types of assistance that 

will stop the foreclosure in return for a hefty fee, such as promises 

to help them negotiate a loan workout or a loan modification. But 

these promises are typically false. The assistance does not stop the 

foreclosure, and the consumers end up losing their homes anyway. 

Foreclosure rescue scams are widely dispersed geographically 

and often local in nature. Indeed, historically State and Local law 

enforcement agencies have prosecuted foreclosure rescue scams because these scams are typically in States and Cities and sometimes 

even in particular neighborhoods. 

53 

In light of the recent increase in foreclosures, the FTC through 

its regional offices is working with Federal, State and Local partners to enhance its efforts in preventing foreclosure rescue frauds 

and has a number of ongoing nonpublic investigations of these 

scams. Commission staff members are leading or participating in 

various State and Local task forces around the country that are 

sharing information and working to identify solutions to the problem. 

The Commission also works to empower consumers to prevent 

harm by educating them about their options when facing foreclosure and other credit problems. The FTC has published more 

than 50 credit-related educational brochures for consumers, including an alert that I have with me here with guidance on steps borrowers can take to avoid foreclosure. This publication, called ‘‘Mortgage Payments Sending You Reeling? Here is What to Do,’’ warns 

consumers that companies may say they can offer services to help 

consumers avoid foreclosure but that often these promises are 

false. It also tells them about what options they may have in terms 

of working out their loan, different loan modification or workout 

options. 

Commission staff have participated in a number of public meetings recently to provide homeowners with information and resources to help them avoid foreclosure. The Commission is also 

planning a stepped-up consumer outreach initiative on foreclosure 

rescue fraud. In particular, the FTC will submit radio public service announcements to stations in cities hardest hit by foreclosures 

as well as publish classified ads for free in free publications. 

The Commission will also send information to community libraries, unions and other organizations warning consumers about foreclosure rescue scams. The Commission is committed to working 

with our partners to combat foreclosure rescue fraud and to protect 

consumers from unfair and deceptive practices generally in the financial services marketplace. 

Thank you for the opportunity to testify at this hearing today. 

[The prepared statement of Ms. Twohig follows:] 

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The CHAIRMAN. Thank you, Ms. Twohig. 

We would like to turn now to the distinguished Ranking Member 

of this Committee, Gordon Smith from Oregon. 

OPENING STATEMENT OF SENATOR GORDON SMITH, 

RANKING MEMBER 

Senator SMITH. Thank you, Senator Kohl, Mr. Chairman, I appreciate your holding this very timely hearing. My wife and I happen to live in a home that is down a hill which was iced over this 

morning, and it took a little time to get up that hill. 

But I am glad to be here because this issue, as we talk about the 

economy and stimulus and all of these things, at the core of it, at 

the center of the problem, is obviously the housing crisis. In 2007, 

the number of foreclosures hit an all-time high in this country, 

with over 400,000 homeowners losing their homes. In my State of 

Oregon, the number of foreclosures increased 57 percent between 

2005 and 2007. 

Obviously, the cons that you are focusing on in this hearing, Mr. 

Chairman, they don’t necessarily focus on the elderly, but the fact 

of the matter is it is a target rich environment because the elderly 

do have a lot of their equity, a lot of their life savings, tied up in 

their real estate, in their homes. 

It is a situation that is intolerable. It is a problem that I think 

calls upon State, Local and obviously the Federal Government as 

well to enforce our consumer protection laws and prosecute those 

who would target anyone, but in particularly elderly who may be 

vulnerable in a special way to these kinds of schemes. 

We need to do more to educate people as to what their options 

are to prevent foreclosure and how to protect themselves from 

fraudulent schemes. An educated consumer is the first line of defense against fraud and abuse. So I am very pleased with objectives 

to the HOPE NOW initiative and the way it proactively reaches out 

to borrowers. 

To that end, to the end of helping put a brake on this situation, 

Senator Kerry and I introduced in the Finance Committee legislation that would give people who are at risk of default the option 

to obtain safe, fair and obtainable mortgages. 

Under current law, State and Local Governments are permitted 

to issue tax-exempt bonds to finance new mortgage loans to firsttime homebuyers. Our bill would temporarily expand the use of the 

program to include refinancing of existing subprime loans. 

I really believe, Mr. Chairman, that people want—not a handout 

or a bailout—they want a workout. They want the dignity of that. 

That is the spirit of the bill that Senator Kerry and I have introduced. We want to help people who may face foreclosure to stay in 

their homes and at the same time provide needed stimulus to the 

housing industry. 

So I thank all of our witnesses for their presence here today and 

the contribution they are making to the understanding of this Committee and the Senate as to what more we can and should do. 

So, my first question, Ms. Dollar, is to you. I thank you for what 

you do at MBA, and I wonder if you have evaluated or know of the 

legislation that we are proposing. It is actually legislation that 

President Bush spoke favorably of in his State of the Union AdVerDate Aug 31 2005 14:48 Oct 10, 2008 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 H:\DOCS\44093.TXT SAG PsN: JOYCE
68 

dress. I had hoped it would have been part of the stimulus package. I do hope that it will soon be included although it was not included in the stimulus package, in a measure that will get to the 

President. Because I know he will sign it. 

What impact do you see this bill having on homeowners, including seniors who are at risk of foreclosure? 

Ms. DOLLAR. Thank you, Ranking Member Smith. 

MBA applauds the bill that was introduced by yourself and Senator Kerry. We believe that all effort to bring financing options to 

people that are in foreclosure or that are facing payment distress 

are necessary and appropriate in this particular marketplace. The 

MBA and lenders and services are, as you are well aware, reaching 

out to borrowers in an unprecedented way in order to try and modify loans, to create workouts, and to keep people in their homes. So 

any legislation that assists with that ultimate goal, the Mortgage 

Bankers Association is very much in favor of. 

Senator SMITH. Are you aware of States unilaterally trying to do 

this on their own—increase the caps so that they can extend these 

kinds of services to those who otherwise don’t qualify, aren’t firsttime homebuyers? 

Ms. DOLLAR. I am not personally aware of any State-based initiatives. It wouldn’t surprise me if those were being made on various 

different levels and in different States. I know especially on the 

foreclosure rescue side that many, many States are moving toward 

trying to put specific legislation and to address that issue. 

Senator SMITH. Right. 

Thomas Perez, the home I spoke of is in Maryland, and I am curious about what the State of Maryland is doing to reach out to 

seniors to inform them of potential foreclosure scams. 

Mr. PEREZ. In short, first of all I want to apologize for your icy 

beginning to the day. I used to serve on the Montgomery County 

Council, and I hope it wasn’t in Montgomery County. 

Senator SMITH. It is in Bethesda. 

Mr. PEREZ. Oh, my gosh. Well, OK, as soon as I leave here today, 

senator, I will be in touch with the Department of Public Works 

and Transportation. 

Senator SMITH. Montgomery County had a 2-hour school delay 

today. 

Mr. PEREZ. Yes, as we found out this morning, absolutely. 

Senator SMITH. Very justifiably so. 

Mr. PEREZ. I would agree wholeheartedly. 

We have quite a range of things that we are attempting to do as 

it relates to the very important questions that you raised. Let me 

outline just a few. 

We have put together some new products through our Department of Housing and Community Development to assist people, 

lifeline products. There is one product—for instance, what we are 

finding is that there are a lot of people who could climb out if they 

could get a short-term loan of maybe $10,000. They have fallen behind, but their situation is sufficiently stable such that if they 

could just get that little assistance they could climb out. 

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69 

though I don’t want to overstate. We are helping dozens of people. 

We need to be helping thousands of people. 

On the regulatory front, we are now, I think, the second State 

in the country—we issued an emergency regulation that is requiring loan servicers to document on a monthly basis, with precision, 

the precise nature and extent of the modifications that they are 

doing. Because as you—I am a kleptomaniac, so I was stealing your 

line about ‘‘not a handout or a bailout but a workout.’’ As I said 

in my testimony, the data show that there is, regrettably, still a 

very wide gulf between the stated aspirations of loan servicers— 

and I have no reason to doubt the sincerity of their desire to help 

people—but there is a disparity between the stated aspirations and 

the actions. You are, I am sure, well aware of the study from 

Moody’s documenting that one percent of people in danger of foreclosure are getting help. The National Association of Attorneys 

General just released some data last week showing that only 3 in 

10 people in distress are even contacting the servicer—they are 

having so much trouble getting through. 

So we are working hard to, frankly, hold servicers accountable. 

We are one of a handful of States that actually licenses loan 

servicers. So we have regulatory authority to hold them accountable. Most States actually don’t have that regulatory authority to 

hold them accountable. I think that is unfortunate. We are using 

that regulatory authority in an effort to bring them to the table. 

I believe that is the elephant in the room. 

We are doing a ton of aggressive, proactive things like banning 

prepayment penalties—those are very important prospective steps. 

But the most difficult nut to crack in this is the here and now of 

the people that are staring foreclosure in the eye. We are going to 

need—there is no silver bullet for that; it is more like silver buckshot. Both the States and the Federal Government and, frankly, 

and I would argue, most importantly, the servicers need to come 

to the table in a meaningful way with modifications that are taking 

it to scale. 

Senator SMITH. Well, I commend you for that. I also commend 

Montgomery County. It is a great place to live. 

Mr. PEREZ. Thank you. 

Senator SMITH. The condition of this particular place was nobody’s fault—it was nature. 

Mr. PEREZ. Well, thank you. 

Senator SMITH. Thank you. 

Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Smith. 

We now turn to the great Senator from the State of Arkansas, 

Blanche Lincoln. 

OPENING STATEMENT OF SENATOR BLANCHE LINCOLN 

Senator LINCOLN. Thank you, Mr. Chairman. As always, thank 

you for your leadership and bringing us together to discuss this 

issue. The Aging Committee is one of my favorite Committees because it really does focus on the issues that concern the constituencies that we represent in our elderly population. The chairman 

brings forth great issues. 

70 

We know across the Nation that foreclosures have increased by 

95 percent in the past year due to the rising interest rates and declining housing prices, predatory lending. In our State of Arkansas, 

there were 14,310 foreclosures in 2007, which was up about 10 percent from 2006. But we also know and hear from so many across 

our country that it is going to get worse this year and that we are 

going to see more and more, and it is going to be more devastating 

if we don’t do something to really start taking a handle on things 

and setting things straight. 

I know Senator Kohl is working on something right now, and we 

appreciate that. I look forward to working with him on that and 

the Mortgage Rescue Fraud Act. Again, his leadership in, whether 

it is the Elder Justice Act or a host of other things where he has 

been looking out for our seniors, is great leadership, and I appreciate that. Mr. Chairman, you do a wonderful job at that. 

Just a couple of questions—I know you all have already covered 

some things before I got here in terms of the outreach and better 

information and understanding of what exists out there to help 

seniors particularly. 

But Mr. Malone, we appreciate you coming before the Committee 

and sharing with us your experience. I am not sure if you have answered this or not, but did you try to contact your lender during 

the time you were unable to make your payments to try to negotiate some kind of an arrangement? 

Mr. MALONE. Yes, I tried several times, but I never was able to 

talk with anyone about it. 

Senator LINCOLN. They never responded to you? 

Mr. MALONE. I left messages for them to call me, and they never 

called back. 

Senator LINCOLN. Of course that is such an issue. I know particularly with seniors, as we went through the transition into the 

Part D in Medicare, the prescription drugs and the dual-eligibles, 

we had a really tough time getting the folks, the agencies, that we 

needed to work on those issues. So really being able to just make 

contact with folks needs to be a big part of the steps so that you 

can understand what your options are available to you. 

Ms. Dollar? 

Ms. DOLLAR. Yes? 

Senator LINCOLN. Yes. Secretary Paulson has recently announced 

a new agreement through the Hope Now Alliance that is called 

Project Lifeline. . . 

Ms. DOLLAR. Yes. 

Senator LINCOLN. . . . where lenders agree to halt foreclosure 

proceedings for 30 days if the homeowner contacts their lender and 

attempts to put out a payment plan. It is only available to people 

who are more than 90 days behind their payments and that are 

facing immediate danger of foreclosure. 

How much can realistically be done in 30 days? I mean, it seems 

like that is not an awful lot of time. When you are having a hard 

time getting in touch with people and putting all those bits and 

pieces together, 30 days can tick away pretty quickly. 

What sort of arrangements do lenders expect to work out with 

those homeowners, do you think? 

71 

Ms. DOLLAR. Well, lenders have a number of different that they 

can provide to homeowners, whether it is a temporary forbearance 

plan—something that probably would have assisted Mr. Malone 

when he was having problems with his loan—where a lender will 

look at the amount that is outstanding and maybe set it for payment over a longer period of time so the arrearage can be paid, or 

reduce payments temporarily, or reduce the interest rate, or completely modify the loan so that a borrower can actually meet the 

payment obligation, and it is a different payment obligation that 

they can meet. 

Project Lifeline is intended as an immediate stop to the foreclosure process. Because at 90 days you are really heading toward 

sale at that point in time. So this is a breath to stop that foreclosure process—and that is the time when these rescuers come in 

and really victimize people. So it gives the borrower a chance to 

talk to their servicer, to talk to their lender, to submit financials. . . 

Senator LINCOLN. If they can get in touch with them. 

Ms. DOLLAR. Yes. 

Senator LINCOLN. If they can get in touch with them. 

Ms. DOLLAR. The HOPE hotline is manned by HUD-approved 

counselors. If borrowers cannot get in touch with their lender or 

servicer or have problems, they can call the HOPE hotline, and the 

HOPE hotline has access into those servicers and a manner of getting in touch with them. So there is that telephone number that 

we are publicizing as well. 

But Project Lifeline just allows breathing room in order to look 

at the mortgage, look at the payment options and see whether 

there is a way the borrower can be helped into saving their home. 

Senator LINCOLN. So you think that 30 days is adequate? 

Ms. DOLLAR. I think the 30 days provides an additional window 

and a stop on a proceeding that is already probably nearing its conclusion at that point in time. It should provide servicers with 

enough time to look at the financial information. 

I don’t think that the 30 days is a limit, that if they are not 

working toward something a servicer can’t voluntarily continue it 

longer if there is discussion going on. But this is just what they 

have agreed to is this 30-day pause. 

Senator LINCOLN. Well, so when we hear about the concerns 

about these mortgages, particularly the ones that have been, you 

know, divided up and sold into other secondary markets and a host 

of other things, is that enough time to realize who actually holds 

those bits and pieces of that mortgage in order to be able to bring 

it back together and figure out how you are going to do that? 

Ms. DOLLAR. Well, the servicer has the ability to act on behalf 

of any securitizer that is holding ownership of the loan. The 

servicer is the point of contact who generally has the authority 

from the holder of the loan in order to modify the loan or in order 

to make payment options or workouts. So that servicer is the point 

of contact and is the correct entity to discuss it with. 

Senator LINCOLN. They keep that authority? 

Ms. DOLLAR. Yes, they do. 

Senator LINCOLN. Do you think there is any problem—I just, I 

try always to apply as much of my own life to the practicality of 

72 

what I am asking others to do and participate in. My mom, who 

is a widow, she is a Lifeline Partner. Do you think there is any confusion for seniors in terms of the title of that? 

Ms. DOLLAR. I don’t know that there would be. . . 

Senator LINCOLN. Has anybody else asked that? 

Because there is a woman even more elderly than my mother 

that lives across the street from her, and she has one of those Lifeline buttons that, you know—I just wonder if there any con—. 

I just know that we had a hearing in the Finance Committee last 

week, and we were talking about choices on health care and other 

things like that, and one of the gentlemen that was testifying about 

his personal experience was saying that, you know, when there are 

so many names and so many choices it is difficult for our elderly 

population to kind of keep all that going, keep all that in one place. 

But I am just not. . . 

Ms. DOLLAR. When you may just be looking for two different 

forms of relief in medical versus mortgage, and hopefully that 

is. . . 

Senator LINCOLN. I hope. 

Ms. DOLLAR. . . . looking for the relief they find the program. 

Senator LINCOLN. I just was—it occurred to me because it would 

have confused me if somebody had said that, and of course we are 

faced with millions of acronyms up here every day that we have to 

keep apart. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Lincoln. 

Mr. Malone. 

Mr. MALONE. Yes, sir? 

The CHAIRMAN. What kind of advice would you give to future 

homeowners who might find themselves in a similar situation as 

you? 

Mr. MALONE. First, I would advise them to see a lawyer. I think 

that is the best thing to do—find a lawyer and talk the situation 

over with the lawyer, and they can guide them right. 

The CHAIRMAN. Thank you. 

Mr. MALONE. Thank you. 

The CHAIRMAN. Mrs. Doyle, in the case of Ms. J in your testimony, you pointed out that the title company issued checks without 

question to the various parties involved in the sale of Ms. J’s home. 

Do you find that there are third parties involved in these transactions that enable the scams to move forward, as in the case of 

Mrs. J? 

Mrs. DOYLE. Yes, I do. That is a very good question. 

Because one of the things we have learned in representing our 

clients in these scams is that many of them are funded by loans 

that are closed through closing services, many of which are title 

companies. We just had—there is the case of Mrs. J and then another case I mentioned, Mrs. K, where we just got discovery in our 

legal proceedings and learned that on the HUD–1 for the sale of 

her home it did indicate that the scammer was going to get the 

$32,000 of equity in the home. 

But as it turned out in discovery, that wasn’t even correct—that 

the HUD–1 did not reflect the actual checks cut at the closing. In 

this particular case, a check was cut for a great deal of that 

73 

$32,000 to Wells Fargo Acceptance Corporation, and we believe it 

was to pay a car loan for the scammer. So as Mrs. Kirk’s husband 

lay dying, and they were desperate for money, the title company 

cut a check to pay off a car that belonged to the scammer. 

In Mrs. J’s case, it was so interesting, because on the HUD–1 it 

showed $58,000 to go to Mrs. J as the seller. Instead, the scammer 

gave a disbursement notice to have it divided up, I think among 

maybe six different people, most of whom my client had never 

heard of. It seemed to me when I looked at it, it was as if a den 

of thieves was dividing up the loot, and some people would get— 

just somebody got $8,000, somebody got $10,000. She didn’t know 

who these people were. She had never met them before. The title 

company cut those checks. 

Now, under RESPA, a HUD–1 has to clearly, correctly reflect 

who is getting the checks out of the closing, where the proceeds are 

going. So there is violation No. 1. But RESPA has no enforcement. 

The penalties are nonexistent in that situation. 

Now, we have filed claims for negligence and breach of duty 

against these title companies, but they fight us very hard. The 

state of the law in Wisconsin is such that there is great deference 

given to closing agents. They don’t want them to become the police 

officers of these. 

On the other hand, these things just shock me. How could they— 

so they get her car paid for, the title company writes a check, and 

then she just went home and slept and knew that the Kirks were 

destitute. So, yes, that is one example. 

In addition, appraisers, sometimes the lenders knew or should 

have known that they were getting involved with a scam. So there 

are many other parties that we looked to. 

It might be an area in the RESPA act to look, maybe enhance— 

extremely enhance—the penalties for violations by these closing 

companies. 

Thank you. 

The CHAIRMAN. Thank you very much. 

Ms. DOLLAR. Can I address this issue, very quickly, with the 

third party. . . 

The CHAIRMAN. Ms. Dollar, go ahead. 

Ms. DOLLAR. Thank you. 

On the mortgage fraud front, we run into these same issues dealing with third parties within the transaction, undisclosed transfers 

on the HUDs, and it is costing the lending industry billions of dollars every year in losses. The schemes, even though they target different victims, they are often perpetrated in much the same way. 

So we see these same types of parties, whether it is inflated appraisals or it is falsified issues on the HUD–1 coming through foreclosure rescue as well as other mortgage fraud schemes. 

There is a lot of Federal law out there that addresses the ability 

to go after this type of conduct criminally. I don’t necessarily see 

that enhancing penalties under a statute that is designed to inform 

consumers about real estate settlement addresses the very, very 

criminal conduct that we see in these cases and that we have Federal and State criminal laws that address. 

The CHAIRMAN. Thank you. 

74 

Mr. Anderson, since the passage of the Minnesota law restricting 

scam artists taking advantage of troubled homeowners, have you 

seen a downturn in these types of scams? 

Mr. ANDERSON. That is a terrific question, Mr. Chairman. 

There has been a downturn, but what we have seen is that these 

people, the scammers, have gone underground. They can get lists 

of the foreclosures—instead they used to boldly advertise on telephone poles and different places, but now they just direct mail. 

Just recently there was a case where one of these scammers 

came in on an elderly person, fixed income, had $50,000 in equity, 

was only $4,000 behind on her payments, and three days before the 

sheriff’s sale was told by this scammer, ‘‘If you don’t sign it over 

to me now, you will be out of the house at the sheriff’s sale.’’ That 

is the big part of—I appreciate the Lifeline program, and all the 

different programs will help a certain amount of people—but we 

have got to get the word out. We have got to, either through the 

servicers do direct mailings, through advertisement in papers and 

different things working with the bankers, get this information out. 

In that case, luckily, that person met up with an attorney, and 

because of the 3-day right of cancellation got out of that deal, and 

the equity was saved. So that was a win. But only fortunately because she got a hold of someone. 

I met with someone just last week—and I just share this story— 

she is facing cancer, she is out of her job, 62 years old, and just 

not very far behind in her payment. An exact same question: She 

won’t answer the calls from her lender or from other people because they are being nasty and, you know, she is doing the best 

she can. So what happens is they turn to other means of someone 

they think they trust. 

Again, fortunately, I was able to meet with her and say, ‘‘Look, 

here are your options. Here are some counseling agencies. If we 

sell, I can get your equity back out of the house.’’ But the key is— 

even the enforcement is good, the law is fantastic, but unless we 

catch them, we can’t do anything about it. 

That is where the education becomes so, so important, and getting the word out of all the options to people and figuring out creative ways to work with the servicers and everyone to get this information out. 

The CHAIRMAN. Thank you. 

Ms. Dollar, do loan service companies, or mortgage lenders, have 

any safeguards in place to help homeowners avoid these scams? 

Ms. DOLLAR. Mortgage lenders try to educate as much as we can, 

and we are involved in a concerted effort to reach homeowners at 

this point in time just in unprecedented ways. 

There is door-to-door, you know, knocking door-to-door for troubled homeowners at this point in time. They are ramping up the 

call lines. They have established the hotline. So they are putting 

out as many feelers as they can to people who are distressed and 

who are having problems with making their mortgage payments. 

The thing is is that the people who do this are engaging in criminal conduct. These are criminals who are out there trying to steal 

from people. The lenders end up being as much victims as the 

homeowners are. 

75 

A lot of time the lenders are the ones who do the next loan, and 

the next thing you know the lender is involved in a lawsuit by the 

prior owner when they have a new person in the home. 

Or in the case of a scheme that there were just indictments on 

in New York, six people were indicted, they went out and they 

saved 80 homes from foreclosure. They did it by getting straw buyers and telling these people you are going to help someone in foreclosure, and then obtaining big loans from banks to pay off the 

other loans based on falsified income and asset data of the new 

borrowers. 

So now the banks have over $20 million in bad loans, and we 

have a situation where people have lost homes and a whole other 

group of people who now acted as the front person for a fraudulent 

loan. So this affects lenders as much as it does consumers. These 

are criminal acts. 

The CHAIRMAN. Thank you. 

Ms. Twohig, in your testimony you cite several laws which the 

FTC enforces to combat predatory or deceptive financial practices. 

Would you comment on the adequacy of these laws to address the 

foreclosure rescue scam issue? 

Ms. TWOHIG. Our primary tool—. The number of laws that we 

enforce include—in addition to the FTC Act we enforce the Truth 

in Lending Act, which contains the Home Ownership and Equity 

Protection Act, which goes to very high rate loans, which sometimes comes into play here if it is basically a refinancing scheme 

that might be covered by that law, which is HOPA. We also enforce 

the Credit Repair Organizations Act and a number of other particular credit statutes. 

I think the main tool that we will be using to address the foreclosure rescue scams will be Section 5 of the Federal Trade Commission Act which prohibits unfair and deceptive acts and practices. Under that Act, in our cases we can get equitable remedies, 

monetary remedies, not only of the particular injury to the consumers, but we also get disgorgement of ill-gotten gains. 

So to the extent that it was commented earlier it may be difficult 

to prove up specific injury to consumers, we have another tool in 

our arsenal, and that is to make sure that the fraud artist disgorges their ill-gotten gains. So we think right now we have quite 

a few tools to address these problems. 

The CHAIRMAN. All right. 

Generally, to the panel, I would like to ask this question: I am 

considering legislation that would create a Federal floor regulating 

foreclosure rescue transactions. Legislation I am considering would 

limit a foreclosure consultant from engaging in certain practices 

like collecting any fees or compensation prior to completion of the 

contract and prohibiting a consultant from obtaining the power of 

attorney from a homeowner. In addition, the bill would allow 

States to take action against scammers with FTC notification. 

Do you believe that this would be a good idea to protect people 

in States without foreclosure rescue scam laws? 

Mr. Perez, would you like to comment? 

Mr. PEREZ. Sure. 

My first point would be to ensure that there would be no preemption of State laws. As long as that were the case, as I pointed out 

76 

in my testimony, I am a strong believer in redundancy in law enforcement. We need Federal and State Governments working together because, again, at any given point, the laws are only as good 

as the political will of those enforcing them. 

I would note, as I mentioned in my testimony, one thing that we 

have done at a State level—and this is about to pass in the next 

few weeks—is we are actually banning the conveyance of property 

during this stage. Because I have concluded, based on dozens and 

dozens and dozens of conversations with victims that the transfer, 

the conveyance, of the property is inherently ripe with so much potential for fraud that it should simply be disallowed. 

We have a number of what I would call commonsense exceptions, 

but the transaction has been so fraught—and, again, it gets back 

to this, ‘‘Just sign the document,’’ and you are signing 50 documents and you don’t realize that you have signed over a quit claim 

deed. There are those conversations that are occurring: ‘‘Yeah, you 

are signing over your loan, but don’t worry—you will get it back 

in six months when you are back on your feet.’’ That is baloney, 

as I said before. 

So I applaud your efforts, Mr. Chairman, to try to have the Federal Government play a role. As long as the States can continue 

their efforts to be these laboratories of democracy in protecting consumers, I think having that wonderful one-two punch would make 

all the sense in the world. 

Mr. ANDERSON. I would tend to agree, and again, with the preemption. But I think just passing a bill like that would bring it to 

more notice to the United States, you know, to the people out there 

that there is this availability. Which in that case, if they called and 

said, ‘‘Hey, I have this problem going on,’’ and then they are going 

to be seeking out help, which there will be State and local help as 

well as the Federal help. 

So I think anything to bring the notice out so people have more 

information—the more we can educate the consumer, the more 

they are protected. There is no question about it. 

The CHAIRMAN. Mrs. Doyle. 

Mrs. DOYLE. I certainly would applaud your efforts in doing so 

and feel that could play a very positive role in trying to bring this 

particular scam and this element, this really bottom-feeder element, to the whole mortgage foreclosure crisis. 

I like the idea to deal directly with the consultants. As Mr. Perez 

said, these mortgage reconveyance schemes really deal a lot with 

individual State property laws and very—so I think that they 

might not be as appropriate for Federal legislation. But certainly 

the consultants are. They are the people like Mrs. Klermund met 

who said, ‘‘I will help you get out of your jam and get you some 

money.’’ So having a contract, having specific statement of services, 

having to sit down and go through that with them, having a 3-day 

right to rescind that contract, and also having the opportunity to 

limit the amount of fees or what might be taken out of it are very 

important elements and would be very helpful. 

I also would echo, however, the concern we have about preemption of State laws that might be more restrictive or provide strong 

remedies, and also preserving a, or including a, private right of action for people who have been victimized. 

77 

Law enforcement has been pushed to the limit. I, really, in Wisconsin I very much respect the prosecutors who are taking on these 

cases. It takes them a long time to put together a good case. We 

had talked earlier about the fact that there are criminal penalties 

and so on, but it takes years. It is not a solution. It is better to 

prevent in the beginning than put people in that position. 

The CHAIRMAN. Thank you. 

Mrs. DOYLE. Thank you. 

The CHAIRMAN. Ms. Dollar. 

Ms. DOLLAR. The principles are wonderful, and anything that we 

can do to assist homeowners in distress is laudable. 

On the law enforcement funding issue as well, that is very, very 

important. Any law that is enacted, or even the ones that are on 

the books, one of the biggest issues that we have is that there is 

not funding in order to enforce them. A lot of laws that are out 

there do reach the conduct that underlies the mortgage foreclosure 

schemes, and there just isn’t the resources in order to prosecute or 

investigate it. That is just so important in anything that is considered. 

But the MBA looks forward to working with you on the terms of 

any bill you might propose. 

The CHAIRMAN. Thank you so much. 

Ms. Twohig. 

Ms. TWOHIG. Well, as I mentioned previously, from the Commission’s perspective, we already have quite a few tools at our disposal 

to address this problem. Nevertheless, we would be happy to take 

a look at anything you proposed and consider it and work with you 

and your staff. 

In terms of the State perspective, I would defer to them on 

whether the States feel like that would be helpful for them. As I 

mentioned in my remarks, the States are very important actors in 

this arena. 

The CHAIRMAN. Thank you. 

Ms. Lincoln. 

Senator LINCOLN. Thank you. 

Just one quick question of Secretary Mr. Perez. The reverse 

mortgage issues. I was just wondering if you all have seen the 

same kind of—we have heard about abuses in that arena—what 

abuses you have seen there and how they are similar in what we 

have discussed here today and maybe some of the ways that you 

have looked at that. 

Mr. PEREZ. Sure. We have seen—we are beginning to see more 

people from the reverse mortgage context who are in trouble. A lot 

of them are because they have lived well and there is no more equity left in their home because they took out a mortgage, and now 

they are 87 years old, and so they are running into difficulty. 

One of the provisions that I think has had some degree of success 

is the mandatory counseling requirement before you can get a reverse mortgage. I think that is something that is very useful. 

We have a first-time homebuyer’s program. We have a mandatory counseling requirement. The foreclosure rates of those programs are infinitesimally small. So that is, I think, very, very useful. 

78 

But one of the challenges is that there is a capacity problem. By 

that I mean there are not a sufficient number of counselors to address the need. So part of my set of recommendations was to continue the efforts at a Federal level to build capacity in nonprofit 

communities so that people have someone to go to. 

Because we are beginning to hear more people in the reverse 

mortgage context. I don’t think those products are sufficiently, well, 

consumer-friendly yet. I think, you know, there are so many costs 

involved. My mother—we had that discussion with her. Her annual 

income was about $17,000, and she owed her home free and clear— 

that was her only asset. We ultimately decided not to go with one 

because the costs were just—the entity was getting rich, and it just 

wasn’t a good deal for her. 

I am fearful that there aren’t enough people who are having the 

benefit of that advice, and so it continues to be a challenge. 

I just wanted to say one thing. You asked a really good question 

before—and all the questions have been great—but you asked 

about the proposal regarding people who are 90 days behind, and 

I just couldn’t resist the urge to say, I don’t think that is nearly 

enough. 

Anecdotally, and through data that has been presented by, again, 

Moody’s and so many other entities, the National Association of Attorneys General, it is taking weeks just to get through to a 

servicer. The notion that there is going to be a 30-day period—well, 

it is better than nothing, I guess, but not by much. 

The problem is the servicing industry is built on a model that is 

designed for a trickle of people coming in the door or calling on the 

phone. We now have the tsunami, and they haven’t yet adjusted. 

The problem before was there was shoddy underwriting by all sorts 

of underwriters, that you are well aware of. 

Now they are overcompensating. So when someone comes in and 

they are in trouble, they are looking at every little thing, and they 

are saying, ‘‘Sorry. We can’t help you.’’ That is why we have one 

percent of the people who are in danger of foreclosure getting 

meaningful assistance. Thirty-day forbearance is not meaningful 

assistance. So we have now got that ‘‘porridge is too hot-porridge 

is too cold’’ thing going, and we need to develop a better balance. 

I strongly urge the Senate and the Congress to really exercise its 

authority to hold servicers accountable because all too frequently 

they have these contracts with the hedge funds, and they look at 

themselves as only accountable to the hedge fund that they have 

contracted with. We are trying to make the case at a State level 

that a half a loaf or a third of a loaf is better than no loaf at all, 

and that is what you are going to get if you continue to move people to the precipice of foreclosure. 

Senator LINCOLN. Well, the reason I asked that question is our 

experience with the prescription drug piece because some of my 

seniors thought they had been on hold for 30 days. 

Mr. PEREZ. Right. 

Senator LINCOLN. You know, they would call in, and they 

couldn’t find anybody to help them or answer their questions, and 

what have you. So that was the reason for the question. 

Mr. PEREZ. Well, it is. . . 

Senator LINCOLN. Glad to hear your side of that. 

79 

Mr. PEREZ. Thank you. 

Senator LINCOLN. Thank you. 

Ms. DOLLAR. Can I make a quick statement? 

The Moody study is, or the article was, it is not timely information at this point in time. Even the footnotes to the study indicate 

that that one percent is probably not accurate, and that at that 

time it was probably more 30 percent of homeowners were getting 

assistance. But this was also many months ago when the foreclosure flood just started, and servicers were not ramped up yet to 

deal with it. 

Servicers, as I said, have been taking unprecedented measures to 

try and not only field calls that are coming in but to reach out 

proactively to borrowers in all types of ways in order to assist them 

to modify their mortgages. So, the servicing industry is reacting, 

and. . . 

Senator LINCOLN. What is the average time, then? What is the 

average time that you are saying that people are being serviced? 

Ms. DOLLAR. I don’t have that information, but the MBA can provide that to you afterwards, and I will ask them to do that. 

Senator LINCOLN. That would be helpful. 

Ms. DOLLAR. Thank you. 

Mr. PEREZ. Senator, I commend your attention to the, this is now 

last week, report released by the National Association of Attorneys 

General who got data from servicers showing that less than 3 in 

10 people in distress were even able to get ahold of a servicer. So, 

the Moody study is a couple months old. Now I commend your attention to last week’s study. 

There are people who are trying—I don’t have any doubt—but 

they are not nearly where they need to be, and they haven’t built 

the model that deals with the scale and scope of the challenges before us. 

The CHAIRMAN. Thank you, Senator Lincoln. 

I would like to thank all the members of the panel for journeying 

here and making an appearance before this Committee to detail 

your experience and your expertise in this serious issue of foreclosure rescue scams that is plaguing our country. 

Obviously, there is a lot of work that needs to be done, legislation 

that needs to be passed, education that needs to be pushed ahead. 

With your help and your assistance I think we can make a lot of 

progress. I think we will. To a large extent we thank you for helping us achieve these goals. So, appreciate your appearance. Thank 

you so much. 

This hearing is adjourned. 

[Whereupon, at 12:18 p.m., the Committee was adjourned.] 

(81) 

A P P E N D I X 

PREPARED STATEMENT OF SENATOR SUSAN COLLINS

The deceptive and abusive practices that have caused so much personal heartache 

and economic distress in the national mortgage markets are especially outrageous 

when they are directed against senior citizens. Seniors on fixed incomes who have 

been talked into unsustainable mortgages can face foreclosure when interest rates 

reset. 

In that situation—often alone, lacking knowledgeable advisors, unaware of government or non-profit services that might help, fearful of contacting their lender, 

and ready to trust anyone who appears to be offering a way to avoid foreclosure— 

seniors may find themselves victimized by criminals who take money for negotiations that are never made, or who offer a sale-leaseback arrangement that will lead 

to the homeowner’s eviction, or who slip a quit-claim deed for signing into a stack 

of papers osentsibly for refinancing. 

We know from numerous accounts in the financial press that some people in the 

foreclosure process have made calculated decisions to be there. Having acquired 

properties with little or no cash investment in hot real-estate markets like Florida 

or California, some people have simply chosen to walk away when market prices fell 

below the level of their mortgages and let the lenders foreclose. Such deliberate 

speculators deserve little sympathy and have no moral claim on taxpayers for assistance. 

Senior citizens are another matter. Few of them have the means or the inclination 

to gamble in real estate as an investment. Even fewer have the time horizon needed 

to reconstruct their lives are losing their homes, which typically represent their 

main financial asset. 

We need to make sure that we are taking all appropriate steps to prevent foreclosure-rescue fraud against seniors—including the fundamental step of helping victimized people avoid foreclosures in the first instance. Consumer-education efforts 

by government, private-sector, and non-profit organizations are essential for both 

objectives. 

We also need to consider whether laws and regulations at state and federal levels 

are well coordinated and well targeted to control foreclosure-rescue efforts, distinguish the legitimate from the abusive, and provide stern punishment and restitution 

for violations. The State of Maine has a new predatory-lending law that addresses 

some of the problems we will learn about today, and I am told that additional focused measures are in development. 

As we take up the issue of foreclosure-rescue fraud, however, we should take note 

of an observation from Will Lund, Maine’s director of consumer credit protection. 

Mr. Lund points out that it is the past few years onslaught of bad loans—nonstandard loans with deceptively low initial rates, lax underwriting, poor documentation, serial rate resets, and punitive fees for pre-payment—that create the demand 

for the services of the foreclosure-rescue operations that so often lead to fraud and 

heartbreak as well as foreclosure. Both problems call for more action. We need to 

make special efforts to protect seniors from deceivers, and we need to continue 

sharpening state and federal protections against deceptive and abusive lending practices. 

I know the Federal Trade Commission, which has a witness at this hearing, is 

cooperating with state agencies as well as exercising its authority to prosecute deceptive trade practices. As we consider new federal responses to this problem, I hope 

we can draw on the lessons accumulated in such federal-state collaboration, and on 

predatory-lending initiatives already adopted in Maine, New Hampshire, and other 

states. We should be careful of displacing or preempting state and local authority 

because they are the legal first responders who are in closest touch with the perpetrators and victims of these heartless frauds. 

82 

I commend the Chairman and Ranking Member for conducting this hearing. It is 

tragic that many senior citizens have been led into loans that are triggering foreclosures, and it is outrageous that criminals should add to their distress with fraudulent offers of aid. 

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