FINANCIAL CRIME

Foreclosure Rescue 

Schemes Have 

Become More 

Complex, and Efforts 

to Combat Them 

Continue

Report to Congressional Committees

October 2013

GAO-14-17

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-17, a report to 

congressional committees 

October 2013 

FINANCIAL CRIME

Foreclosure Rescue Schemes Have Become More 

Complex, and Efforts to Combat Them Continue

Why GAO Did This Study

In July 2010, GAO reported on federal 

efforts to combat foreclosure rescue 

schemes—schemes that promise but 

do not deliver foreclosure prevention 

assistance. Subsequently, the DoddFrank Wall Street Reform and 

Consumer Protection Act required 

GAO to study interagency efforts to 

crack down on these schemes. This 

report updates GAO’s 2010 report and 

examines (1) available information 

about the prevalence and nature of 

foreclosure rescue schemes, and (2) 

the status and scope of the federal 

government’s multiagency effort and 

other major initiatives to combat them. 

To address these objectives, GAO 

analyzed consumer complaints, 

obtained information from federal 

agencies participating in FFETF, and 

interviewed representatives of six 

states with high populations of 

borrowers at risk of foreclosure, and 

nonprofit organizations that are also 

making efforts to combat these 

schemes. 

In its written comments, Treasury 

noted that it valued GAO’s insights as 

it continues to combat foreclosure 

rescue schemes. The Special 

Inspector General for the Troubled 

Asset Relief Program concurred with 

the findings related to its work and

noted that it has made significant 

progress in combating these schemes 

and will continue to work with law 

enforcement partners to investigate 

them. 

What GAO Found

Foreclosure rescue schemes remain at historically high levels and have become 

more complex. The Federal Trade Commission’s (FTC) Consumer Sentinel 

Network—an online database of consumer complaints received by FTC, law 

enforcement agencies, and other organizations—showed that complaints about 

these schemes rose from around 9,000 in 2009 to more than 18,000 each year in 

2010, 2011, and 2012. In addition, the Financial Crimes Enforcement Network 

reported steady increases over the same period in the number of Suspicious 

Activity Reports (SAR)—reports filed by financial institutions about suspected 

violations of financial laws and regulations—related to these schemes. Agency 

officials and representatives of nonprofits told GAO that the schemes had 

become increasingly complex, creating challenges for law enforcement. For 

example, schemes involving attorneys—which tend to involve greater losses—

had become more common in recent years following a regulation that bans 

upfront fees, but provides an exception for attorneys. These schemes present 

unique challenges because attorneys typically collect fees upfront and 

enforcement officials have difficulty trying to determine whether attorneys are 

providing legitimate services. Furthermore, officials and representatives of 

nonprofits also noted that some populations, including minorities and the elderly, 

continued to be targeted.

Since GAO last reported on this issue in 2010, the Financial Fraud Enforcement 

Task Force (FFETF) and its members have undertaken a number of actions to

educate borrowers on how to avoid being victimized by these schemes. These 

efforts have also emphasized the need for consumers and institutions to report

possible fraudulent schemes and the importance of enhanced information 

sharing among law enforcement agencies investigating and prosecuting these 

schemes. Specifically, FFETF members have developed and participated in

various outreach efforts, including hosting regional education summits for 

distressed homeowners, counselors, and law enforcement officials and directing 

more individuals to resources on FFETF’s mortgage fraud webpage, 

StopFraud.gov. FFETF member agencies’ fraud detection efforts have focused 

on gathering information from SARs and complaints from the FTC Consumer 

Sentinel Network and sharing this information among members. Member

agencies that GAO contacted also indicated that information sharing and 

coordination on investigations among FFETF members had led to joint 

investigations and broad enforcement initiatives. For example, one year-long 

multiagency effort resulted in criminal charges against 107 defendants. Cases 

were also filed against 128 civil defendants in federal courts across the country. 

View GAO-14-17. For more information, 

contact Lawrance L. Evans, Jr. at (202) 512-

8678 or evansl@gao.gov. 
Page i GAO-14-17 Combating Foreclosure Rescue Schemes

Letter 1 

Background 4

Foreclosure Rescue Schemes Remain at High Levels and Have 

Become More Complex 11

FFETF Members Have Focused on Prevention, Detection, and 

Enforcement to Combat Foreclosure Rescue Schemes 24

Agency Comments 33

Appendix I Scope and Methodology 36

Appendix II Comments from the Department of the Treasury 38

Appendix III Comments from the Special Inspector General for the 

Troubled Asset Relief Program 39

Appendix IV GAO Contact and Staff Acknowledgments 41

Table

Table 1: Selected Federal Agencies Involved in Combating 

Foreclosure Rescue Schemes 8

Figures

Figure 1: Number of Home Loan Payments More Than 60 Days Past 

Due, as of March 31, 2013, by State 5

Figure 2: Complaints about Foreclosure Rescue Schemes in FTC’s 

Consumer Sentinel Network, 2009-2012 12

Figure 3: Number of SARs Describing Foreclosure Rescue 

Schemes, 2009-2012 14

Figure 4: Foreclosure Rescue Schemes Alleging Attorney 

Involvement, March 2010-February 2013 18

Figure 5: Timeline of Government Announcements and Number of 

Foreclosure Rescue Scheme Complaints Submitted to the 

HOPE Hotline 23

Contents 
Page ii GAO-14-17 Combating Foreclosure Rescue Schemes

Abbreviations 

ABA American Bar Association

CFPB Bureau of Consumer Financial Protection 

DOJ Department of Justice 

FBI Federal Bureau of Investigation 

FFETF Financial Fraud Enforcement Task Force 

FHFA Federal Housing Finance Administration

FinCEN Financial Crimes Enforcement Network

FTC Federal Trade Commission 

HAMP Home Affordable Modification Program

HUD Department of Housing and Urban Development

IFR Independent Foreclosure Review 

IRR Individual Rights and Responsibilities

LMSPN Loan Modification Scam Prevention Network

MARS Mortgage Assistance Relief Services

MFWG Mortgage Fraud Working Group 

SAR Suspicious Activity Report

SIGTARP Special Inspector General for the Troubled Asset Relief

 Program 

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Page 1 GAO-14-17 Combating Foreclosure Rescue Schemes

441 G St. N.W.

Washington, DC 20548

October 29, 2013

Congressional Committees

From September 2008 through May 2013, about 4.4 million homes had 

been lost to foreclosure.1 In 2010, we reported on individuals and 

companies that had been perpetrating fraudulent foreclosure rescue 

schemes against homeowners who were at risk of losing their homes.2

In November 2009, the President created the Financial Fraud 

Enforcement Task Force (FFETF), a multiagency effort to combat a range 

of financial crimes relating to the recent financial crisis and recovery 

efforts.

These schemes, which can result in significant losses to individuals, 

promise to assist homeowners at risk of losing their homes to foreclosure 

through one of several actions but ultimately do not provide the promised 

relief. Homeowners have lost, and continue to lose, thousands of dollars 

on these schemes, when free help may be available from federal 

programs and private financial institutions.

3

The Dodd–Frank Wall Street Reform and Consumer Protection Act 

required GAO to study current multiagency efforts to combat foreclosure 

To increase federal enforcement in areas of mortgage fraud and 

coordinate outreach, the task force established the Mortgage Fraud 

Working Group (MFWG). MFWG is co-chaired by the U.S. Attorney for 

the Eastern District of California, officials from the U.S. Department of 

Housing and Urban Development’s (HUD) Office of Inspector General, 

officials from the U.S. Department of Justice (DOJ) Civil Division and 

Federal Bureau of Investigation (FBI), and representatives from the 

National Association of Attorneys General. In addition to the working 

group, other federal, state, local, private, and nonprofit entities have 

continued their efforts to combat foreclosure rescue schemes.

 

1

CoreLogic. CoreLogic National Foreclosure Report. (Irvine, Calif.: May 2013).

2

GAO. Homeownership Preservation: Federal Efforts to Combat Foreclosure Rescue 

Schemes are Under Way, but Improved Planning Elements Could Enhance Progress, 

GAO-10-787 (Washington, D.C.: July 15, 2010).

3

FFETF is composed of more than 20 federal agencies, 94 U.S. Attorneys’ Offices and 

state and local partners. 

 
 

Page 2 GAO-14-17 Combating Foreclosure Rescue Schemes

rescue schemes.4 In response, we examined (1) the available information 

about the nature and prevalence of foreclosure rescue schemes and (2) 

the status and scope of the federal government’s multiagency efforts to 

combat these schemes and other major efforts. This report updates our 

2010 report on foreclosure rescue schemes.5

To determine what is known about the nature and prevalence of 

mortgage foreclosure rescue schemes, we collected complaint data from 

the Federal Trade Commission’s (FTC) Consumer Sentinel Network 

database and the Loan Modification Scam Prevention Network 

(LMSPN).6 In addition, we examined published information on the number 

of Suspicious Activity Reports (SARs) related to foreclosure rescue 

schemes.7

 

4 Pub. L. No. 111-203, § 1492, 124 Stat. 1376, 2206 (2010).

We spoke with officials and representatives who manage 

these databases about their data collection processes and internal quality 

controls and tested the data where applicable. We found FTC’s

Consumer Sentinel Network, LMSPN, and SAR data to be sufficiently 

reliable for the purpose of discussing the nature and prevalence of 

foreclosure rescue schemes in this report. We contacted representatives 

of agencies that are part of MFWG that were active in combating 

foreclosure rescue schemes—the Bureau of Consumer Financial 

Protection (CFPB), DOJ, the Federal Housing Finance Agency (FHFA) 

and its Office of Inspector General, FTC, HUD and its Office of Inspector 

General, U.S. Department of the Treasury (Treasury), the Office of the 

Special Inspector General for the Troubled Asset Relief Program 

(SIGTARP), and the U.S. Postal Inspection Service. In addition, we 

5

GAO-10-787. 

6

FTC’s Consumer Sentinel Network is a database of consumer complaints received by 

FTC, as well as those filed with law enforcement and other organizations, including other 

federal and state agencies and nonprofit organizations. LMSPN was formed in 2009 by 

the Lawyers’ Committee for Civil Rights Under Law, a nonprofit legal advocacy 

organization, to engage the Committee and others in the fight against foreclosure rescue 

schemes. It maintains a database of consumer complaints submitted directly through a 

website created by the Lawyers’ Committee for LMSPN—PreventLoanScams.org, and to 

any of the network’s 85 government or 47 nongovernment members.

7

To assist law enforcement agencies in their efforts to combat money laundering, terrorist 

financing, and other financial crimes, the Bank Secrecy Act, Pub. L. No. 91-508, 84 Stat. 

1114 (1970) (codified as amended in scattered sections of 12, 15, 31 U.S.C.) requires 

financial institutions to file SARs to inform the federal government of transactions related 

to possible financial crimes. See 31 U.S.C. §5318(g).
 

Page 3 GAO-14-17 Combating Foreclosure Rescue Schemes

contacted representatives of government-sponsored enterprises 

(enterprises), Fannie Mae and Freddie Mac, as well as offices of the 

attorneys general from Indiana and the five states we spoke with for our 

2010 report—Arizona, California, Florida, Illinois, and New York—which 

have some of the highest numbers of potential foreclosures. We also 

spoke with a number of nonprofit organizations that are actively 

addressing these schemes.

To determine the status and scope of the federal government’s 

multiagency effort and other major efforts to combat these schemes, we 

interviewed officials and obtained relevant documentation from FFETF 

and the MFWG members listed previously. We also interviewed officials 

and obtained documents from the enterprises and nonprofit organizations 

that have undertaken major efforts in this area, including the National Fair 

Housing Alliance, the National Community Reinvestment Coalition, HOPE 

NOW, the Homeownership Preservation Foundation, and lead members 

of LMSPN, including the Lawyers’ Committee for Civil Rights Under Law 

(Lawyers’ Committee) and NeighborWorks America (NeighborWorks). We 

reviewed these entities’ websites to determine what information was 

available on foreclosure rescue schemes and interviewed officials about 

their efforts to conduct outreach, collect consumer complaints, and 

conduct enforcement activities related to these types of schemes. To 

identify requirements for effective internal controls related to fraud 

detection and prevention, we reviewed Standards for Internal Control in 

the Federal Government.8 Additionally, we looked at our past reviews of 

federal programs in which we identified the key elements of a framework 

for fraud prevention, detection, and prosecution.9

We conducted this performance audit from November 2012 to October 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

Finally, we collected 

information on the number of civil and criminal foreclosure rescue scheme 

cases state and federal agencies pursued. Appendix I contains detailed 

information on our scope and methodology.

 

8

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

9

For example, see GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is the 

Key to Minimizing Fraud, Waste, and Abuse in Recovery Efforts, GAO-07-418T 

(Washington, D.C.: Jan. 29, 2007).
 

Page 4 GAO-14-17 Combating Foreclosure Rescue Schemes

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The recent foreclosure crisis has resulted in significant opportunities for 

individuals and companies to take advantage of homeowners who are at 

serious risk of losing their homes to foreclosure. In 2010, we reported that 

national default and foreclosure rates rose sharply from 2005 through 

2009 to the highest level in 29 years. Since 2009, the rates of default and 

foreclosures have steadily declined. However, data from the Mortgage 

Bankers Association for the first quarter of 2013 show that the number of 

home loans potentially facing foreclosure—borrowers who were more 

than 60 days past due—remains elevated, with nearly 1.6 million (4 

percent) of home loans currently being serviced in the United States. As 

figure 1 shows, California and Florida have the highest number of 

potential foreclosures, a statistic that has remained consistent since we 

reported in 2010.

Background
 

Page 5 GAO-14-17 Combating Foreclosure Rescue Schemes

Figure 1: Number of Home Loan Payments More Than 60 Days Past Due, as of March 31, 2013, by State 

In response to the rising number of defaults and foreclosures, using 

authority granted through the Emergency Economic Stabilization Act of 

2008, the administration announced the Making Home Affordable 

Program in February 2009, which includes a number of programs, such 

as the Home Affordable Modification Program (HAMP), intended to assist 
 

Page 6 GAO-14-17 Combating Foreclosure Rescue Schemes

homeowners facing potential foreclosure.10

Further, two major enforcement actions—the Independent Foreclosure 

Review (IFR) and the National Mortgage Settlement—were brought

against leading mortgage servicers following reviews of their foreclosure 

processes. In 2011 and 2012, the Office of the Comptroller of the 

Currency and the Board of Governors of the Federal Reserve System 

(Federal Reserve) issued consent orders against 16 of the largest U.S. 

Under HAMP, Treasury pays 

an incentive to servicers and investors for reducing the borrower’s 

monthly mortgage payment. In addition to HAMP, other government and 

private programs are designed to provide assistance to homeowners 

facing foreclosure. For example, Fannie Mae and Freddie Mac have their 

own loan modification programs. Homeowners may also be able to 

refinance under the Home Affordable Refinance Program, a program that 

was created by FHFA to help homeowners who are current on their 

mortgages, but owe more than the value of their homes. The program is

administered by the enterprises. Individual private financial institutions 

may offer their own proprietary loan modification programs for 

homeowners who do not qualify for HAMP. Free counseling services, 

such as those provided by HUD-certified counseling agencies, are 

available to homeowners seeking to avoid foreclosure and can be 

accessed through the Homeowner’s HOPE Hotline (1-888-995-HOPE). 

The hotline is run by a nonprofit organization that works with a coalition of 

governmental agencies, financial services institutions, and other nonprofit 

groups to help homeowners struggling to make their monthly mortgage 

payments. However, desperate homeowners may be unaware of these 

free alternatives or may be steered away from free sources of assistance.

 

10Pub. L. No. 110-343, § 109, 122 Stat. 3765, 3774 (codified at 12 U.S.C. § 5219). GAO, 

Troubled Asset Relief Program: Home Affordable Modification Program Continues to Face 

Implementation Challenges, GAO-10-556T (Washington, D.C.: Mar. 25, 2010) and 

Troubled Asset Relief Program: Treasury Continues to Face Implementation Challenges 

and Data Weaknesses in its Home Affordable Modification Program, GAO-11-288 

(Washington, D.C.: Mar. 17, 2011).
 

Page 7 GAO-14-17 Combating Foreclosure Rescue Schemes

mortgage servicers.11 The consent orders required servicers to conduct 

foreclosure reviews to determine if borrowers suffered financial harm 

directly resulting from errors, misrepresentations, or other deficiencies 

that may have occurred during the foreclosure process. The mortgage 

servicers were required to retain independent consultants to review 

foreclosures that were initiated, pending, or completed during 2009 or 

2010 and to provide payment to homeowners who suffered financial injury 

as a result of foreclosure processing errors. In 2013, regulators reached 

agreements with 15 of the 16 mortgage servicing companies subject to 

the 2011 and 2012 consent orders to discontinue the foreclosure reviews

and to provide over $3.9 billion in direct payments to eligible borrowers 

and approximately $5.7 billion in foreclosure prevention assistance. In 

February 2012, DOJ, Treasury, and HUD along with 49 state attorneys 

general reached an agreement with the five largest mortgage servicers on 

improper foreclosure practices. This agreement, known as the National 

Mortgage Settlement, resulted in approximately $25 billion in monetary 

sanctions and relief to distressed homeowners.12

 

11In April 2011, 14 servicers entered into consent orders with the Office of the Comptroller 

of the Currency, Office of Thrift Supervision, and/or Board of Governors of the Federal 

Reserve. They were: Ally Financial, Inc.; Aurora Bank, FSB; Bank of America, N.A.; 

Citibank, N.A.; EverBank Financial Corp.; HSBC Bank USA, N.A.; JPMorgan Chase, N.A.; 

Metlife Bank, N.A.; OneWest Bank, FSB; PNC Bank, N.A.; Sovereign Bank; SunTrust 

Bank, Inc.; U.S. Bank, N.A.; and Wells Fargo Bank, N.A. and their affiliates or acquired 

loan servicing companies. The Federal Deposit Insurance Corporation was also a party to 

the Federal Reserve’s order with Ally Financial (GMAC Mortgage). The Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, §§ 311-313, 124 Stat. 

1376, 1520-23 (2010), eliminated the Office of Thrift Supervision and transferred its 

regulatory responsibilities to the Office of the Comptroller of the Currency, the Federal 

Deposit Insurance Corporation, and the Federal Reserve. The transfer of these powers 

was completed on July 21, 2011, and the Office of Thrift Supervision was officially 

dissolved 90 days later on October 19, 2011. Subsequently, two additional institutions, 

Goldman Sachs and Morgan Stanley, also entered into consent orders with the Federal 

Reserve that required a foreclosure review for deficient practices in mortgage loan 

servicing and foreclosure processing.

One of the provisions in 

the settlement is for immediate aid to homeowners needing loan 

modifications through principal reduction, refinancing, or other forms of 

relief. The settlement requires the servicers to pay up to $17 billion in 

12United States v. Bank of America Corp., No. 1:12-CV-00361 (D.D.C. Apr. 4, 2012). The 

participating servicers were: Ally Financial (GMAC Mortgage), Bank of America, Citibank, 

JP Morgan Chase, and Wells Fargo.
 

Page 8 GAO-14-17 Combating Foreclosure Rescue Schemes

principal reduction and other forms of loan modification relief 

nationwide.13

A number of federal and state enforcement agencies perform different 

roles and use different legal authorities to combat foreclosure rescue 

schemes. Within the federal government, CFPB, FTC, SIGTARP, U.S. 

Postal Inspection Service, and agencies within DOJ, FHFA, HUD, and 

Treasury are members of MFWG and have key roles in investigating and 

prosecuting persons who have engaged in these types of schemes (see 

table 1). In addition to MFWG, some member agencies also participate in 

FFETF’s Rescue Fraud Working Group, another multiagency working 

group focused on criminal and civil fraud enforcement related to the 

Troubled Asset Relief Program (TARP), including foreclosure rescue 

schemes. The Rescue Fraud Working Group is co-chaired by officials 

from SIGTARP, Treasury’s Office of Financial Stability, and the Acting 

Assistant Attorney General for DOJ’s Criminal Division. Fannie Mae and 

Freddie Mac play a role in educating consumers about schemes. On the 

state level, state attorneys general play key roles in prevention, detection, 

and enforcement of these schemes.

Table 1: Selected Federal Agencies Involved in Combating Foreclosure Rescue 

Schemes 

Agency Primary role in combating foreclosure rescue schemes

Bureau of Consumer 

Financial Protection 

Publishes mortgage fraud information on its website and 

collects, investigates, and works to resolve consumer 

complaints. Has civil enforcement authority. 

Department of Housing 

and Urban Development 

and the Office of Inspector 

General 

HUD funds the “Know it. Avoid it. Report it.” public education 

campaign on foreclosure rescue schemes and sends 

officials to conduct outreach and collect complaints at public 

outreach events. Homeowners may also meet with HUDapproved counselors during these events. The Office of 

Inspector General investigates civil and criminal fraud 

related to HUD programs.

DOJ Civil Division Prosecutes civil and criminal cases involving mortgage fraud 

and may share information with enforcement officials on 

local mortgage fraud working groups and task forces.

 

13For more information on the foreclosure review process, see GAO, Foreclosure Review

Opportunities Exist to Further Enhance Borrower Outreach Efforts, GAO-12-776 

(Washington, D.C.: June 29, 2012) and Foreclosure Review: Lessons Learned Could 

Enhance Continuing Reviews and Activities under Amended Consent Orders, 

GAO-13-277 (Washington, D.C.: Mar. 26, 2013).
 

Page 9 GAO-14-17 Combating Foreclosure Rescue Schemes

Agency Primary role in combating foreclosure rescue schemes

DOJ U.S. Attorneys Have district-level jurisdiction to prosecute civil and criminal 

cases of foreclosure rescue schemes. U.S. Attorneys 

participate and share information with local enforcement 

agencies in the local mortgage fraud working groups and 

task forces.

DOJ U.S. Trustee 

Program

Enforces bankruptcy law and investigates civil and criminal 

foreclosure rescue schemes involving bankruptcy. 

Federal Bureau of 

Investigation

Investigates a range of criminal financial activities, including 

foreclosure rescue schemes. The Financial Institution Fraud 

Unit oversees FBI field office investigations that focus on 

fraud schemes that involve financial institutions, particularly 

in the areas of mortgage fraud and bank failures. 

Federal Housing Finance 

Agency and the Office of 

Inspector General 

Conducts outreach to federal agencies, industry partners, 

and consumers on mortgage fraud complaints received via 

its hotline and investigates fraud impacting the enterprises, 

as well as federal home loan banks.

Federal Trade 

Commission 

Maintains Consumer Sentinel Network database. Has civil 

enforcement authority to investigate potentially deceptive 

and unfair practices and violations of its regulations involving 

foreclosure rescue schemes. Educates consumers and 

industry about these schemes.

Treasury – Financial 

Crimes Enforcement 

Network 

Issues public financial advisories and guidance on schemes 

and collects and reviews Suspicious Activity Reports for 

potential foreclosure rescue schemes. 

Treasury – Office of 

Financial Stability 

Conducts daily website scans to identify and close 

foreclosure rescue scheme websites by issuing cease-anddesist letters. Conducts preliminary investigations into 

allegations of foreclosure rescue schemes related to TARP 

programs, which may result in referrals to SIGTARP and 

other appropriate law enforcement and regulatory 

authorities. 

Special Inspector General 

for the Troubled Asset 

Relief Program 

(SIGTARP) 

Investigates a range of criminal financial activities related to 

TARP programs, including foreclosure rescue schemes, and 

distributes information alerts to at-risk homeowners and 

presents information on schemes at public events.

U.S. Postal Inspection 

Service 

Enforces laws against mail fraud to protect individuals from 

the fraudulent use of the postal system. 

Source: GAO.

In December 2010, FTC issued the Mortgage Assistance Relief Services 

(MARS) rule, which includes two primary provisions: (1) a ban on 

advance fees for foreclosure rescue services; and (2) a requirement that 

companies inform consumers that a lender may refuse to modify their 

loan and that consumers can reject any terms negotiated with their 
 

Page 10 GAO-14-17 Combating Foreclosure Rescue Schemes

lender.14 Attorneys are generally exempt from the rule if they meet three 

conditions: (1) they provide mortgage assistance relief services as part of 

their practice of law; (2) they are licensed in the state where the 

consumer or the consumer’s dwelling is located; and (3) they are 

complying with state laws and regulations governing attorney conduct 

related to the rule.15 To be exempt from the advance fee ban, attorneys 

must also meet two additional requirements: (1) they must place any 

funds they receive from a consumer in advance of performing legal 

services in a client trust account, and (2) they must abide by state laws 

and regulations covering such accounts.16 CFPB reissued the MARS rule 

without substantive modification in December 2011.17 All of the states we 

spoke with reported having laws similar to the MARS rule.18 In addition, 

FTC reported that as of 2010, at least 30 states and the District of 

Columbia had enacted similar statutes or regulations.19 Except for 

California, all of the states we spoke with said they also had similar 

exemptions for attorneys.

 

14Mortgage Assistance Relief Services, 75 Fed. Reg. 75092 (Dec. 1, 2010); 12 C.F.R. § 

1015.

1512 C.F.R. § 1015.7(a).

1612 C.F.R. § 1015.7(b).

17See Mortgage Acts and Practices—Advertising (Regulation N); Mortgage Assistance 

Relief Services (Regulation O), 76 Fed. Reg. 78130, 78134-38 (Dec. 16, 2011). Although 

FTC retains enforcement authority for the MARS rule, its rulemaking authority relating to 

the MARS rule, along with a number of other consumer financial protection laws, was 

transferred to CFPB, effective July 21, 2011, under the Dodd-Frank Act. Pub. L. No. 111-

203, §§ 1061(b)(5), 1097, 124 Stat. 1376, 2036-37, 2102 (12 U.S.C. § 5581, 15 U.S.C. § 

1638 note).

18See Ariz. Rev. Stat. §§ 44-1378 (2010 Ariz. ALS 143); Cal. Civ. Code § 2944.7, §§ 

2945-2945.11; Fla. Stat. § 501.1377; 765 Ill. Comp. Stat. Ann. 940/1-999; 24 Ind. Admin. 

Code. §§ 5.5-1-1 – 5.5-6-6; N.Y. Real Prop. Law § 265-B. 

19Mortgage Assistance Relief Services, 75 Fed. Reg. 75092, 75099 (Dec. 1, 2010). At the 

time the final MARS rule was issued in 2010, FTC reported that at least 30 states and the 

District of Columbia had enacted statutes or regulations to address MARS-related 

practices. Id. Additionally, states may bring enforcement actions under the MARS rule 

against mortgage-assistance operations. 12 C.F.R. § 1015.10.
 

Page 11 GAO-14-17 Combating Foreclosure Rescue Schemes

Since our report in 2010, data collected by federal agencies suggest that 

foreclosure rescue schemes have increased.20 Data on these schemes 

that federal agencies collect include consumer complaints and reports 

filed by financial institutions. These data show an increase each year from 

2009 to 2011, and a slight decline in the number of complaints in 2012. 

However, the number of complaints through April 2013 suggests another 

increase for the year. Agency officials and others we contacted noted that 

foreclosure rescue schemes had become increasingly complex since 

2010—involving attorneys and the bankruptcy code, among other things. 

In particular, schemes involving attorneys appear to have increased 

recently, presenting challenges to law enforcement.

FTC’s Consumer Sentinel Network, an online database available to law 

enforcement agencies, compiles consumer complaints received by FTC 

and law enforcement and other organizations, including other federal and 

state agencies and nonprofit organizations.21 As shown in figure 2, 

consumers filed almost 9,000 mortgage modification/foreclosure relief 

complaints in 2009 to the entities reporting into the network, but more 

than 20,000 complaints in 2011. The number of these complaints fell 

slightly in 2012.22

 

20

Preliminary data for 2013 suggest that the number of 

GAO-10-787. 

21According to FTC officials, the entities that submitted foreclosure rescue schemes 

complaints to the database were: LMSPN, Better Business Bureaus, CFPB, FFETF, 

Internal Revenue Service, California Attorney General, Idaho Attorney General, Indiana 

Attorney General, Iowa Attorney General, Maryland Department of Labor Licensing and 

Regulation Enforcement Unit, Michigan Attorney General, Montana Attorney General, 

Oregon Department of Justice, South Carolina Department of Consumer Affairs, Los 

Angeles County Department of Consumer Affairs, and the Consumer Fraud Unit of 

Orange County, Florida.

22According to Lawyers’ Committee and Homeownership Preservation Foundation 

representatives, the Homeowner’s HOPE Hotline’s team dedicated to addressing 

foreclosure rescue schemes experienced a lack of funding in early 2012. This gap in 

funding may have contributed to the decrease in complaints submitted to the Consumer 

Sentinel Network in 2012. 

Foreclosure Rescue 

Schemes Remain at 

High Levels and Have 

Become More 

Complex

Consumer Complaints and 

Suspicious Activity 

Reports about Foreclosure 

Rescue Schemes Increased 

after 2009

Consumer Complaints 

Reported by FTC and Lawyers’ 

Committee
 

Page 12 GAO-14-17 Combating Foreclosure Rescue Schemes

complaints could increase for the year, as consumers had filed more than 

7,000 of these complaints through April 30.23

Figure 2: Complaints about Foreclosure Rescue Schemes in FTC’s Consumer 

Sentinel Network, 2009-2012

Based upon a review of FTC’s Consumer Sentinel Network, FTC 

representatives reported that the median amount paid for foreclosure 

rescue services remained relatively unchanged, from $2,400 in 2009 to 

roughly $2,500 in 2012, although not all complaints included this 

information.24

 

23Despite the general increase in these complaints, they represent a small proportion of all 

consumer complaints in the database, accounting for roughly 1 percent or less of all 

complaints in each of these years. 

In addition, FTC officials reported that in 2009, the highest 

percentage of complaints were from homeowners in California. That is, of 

those consumers that reported their state of residence, nearly 30 percent 

were from California. While California continued to be the state with the 

24In 2009, 72.6 percent reported a dollar amount; in 2012, roughly 46.5 percent reported 

this information. According to FTC officials, all complaint information in the Consumer 

Sentinel Network is submitted by consumers and is unverified. 
 

Page 13 GAO-14-17 Combating Foreclosure Rescue Schemes

highest number of complaints, its share of all complaints decreased in 

each of the subsequent years, falling to 23 percent in 2010, 19 percent in 

2011, 18 percent in 2012, and 15 percent in the first 4 months of 2013. 

Florida also had relatively more complaints compared with other states, 

accounting for between 7 and 10 percent of all complaints over the same 

period.

In 2009 and 2010, most of the foreclosure rescue scheme complaints in 

the Consumer Sentinel Network were submitted directly to FTC by 

consumers. However, since 2011 the Consumer Sentinel Network’s 

primary source of foreclosure rescue scheme complaints has been the 

Lawyers’ Committee. In 2011, 53 percent of complaints were submitted 

by the Lawyers’ Committee. That percentage increased to 61 percent in 

2012 and 75 percent in the first 4 months of 2013. Since early 2010, the 

Lawyers’ Committee has maintained a complaint database for its publicprivate partnerships, collectively the LMSPN, which specifically collects 

information on complaints related to foreclosure rescue schemes. As 

noted earlier, the database includes consumer complaints submitted 

directly through the Lawyers’ Committee’s website, as well as those 

submitted to any of LMSPN’s 85 government members or 47 

nongovernment members using the Lawyers’ Committee’s standardized 

complaint form.25

Treasury’s Financial Crimes Enforcement Network (FinCEN) receives 

SARs from financial institutions about suspected violations of financial 

laws and regulations. FinCEN reported that in 2009 and 2010 it received 

189 and 556 SARs, respectively, that contained narratives describing 

foreclosure rescue schemes. In 2011, the number of SARs related to 

foreclosure rescue schemes increased considerably, rising to 2,799, and 

in 2012 the number increased further to 4,427 (see fig. 3). However, 

FinCEN noted that a growing awareness of and focus on foreclosure 

rescue schemes may have influenced this upward trend. For example, 

In addition to basic information about the homeowner, 

the complaint form collects other detailed information about the alleged 

schemes, including type and amount of dollar losses. Like the complaints 

submitted to the Consumer Sentinel Network, complaints submitted to 

LMSPN peaked in 2011 and fell slightly in 2012, but early data for 2013 

suggest another potential increase.

 

25The number of partners in the LMSPN was current as of March 2013, but continues to 

grow as more government and nongovernment organizations join. 

Suspicious Activity Reports 

from Financial Institutions
 

Page 14 GAO-14-17 Combating Foreclosure Rescue Schemes

FinCEN issued an advisory in June 2010 that encouraged SAR filers to 

use “foreclosure rescue scam” in the narrative part of the report to 

facilitate the identification and isolation of pertinent SARs.

Figure 3: Number of SARs Describing Foreclosure Rescue Schemes, 2009-2012

Note: A single SAR can include multiple suspicious activities. These numbers include all SARs that 

have foreclosure rescue schemes as one of the suspicious activities noted, and increases after 2010 

may in part be due to FinCEN’s June 2010 advisory to use the term “foreclosure rescue scam” in 

report narratives. 

While both national- and state-level sources of consumer complaints 

indicate that foreclosure rescue schemes continue to be a concern, 

consumer complaints may not provide a precise measure of the actual 

prevalence of these schemes. As we discussed in 2010, consumers can 

file complaints with any number of federal or state agencies, making the 

actual number of complaints difficult to aggregate. FTC officials also told 

us at that time that the complaints the agency received might represent 

only a small portion of potential schemes. Officials we contacted for this 

report also noted that consumers might not report being victims of fraud, 

either because they were unaware that they had been victimized or 

because they were embarrassed about having fallen prey to a scheme. 

Finally, trends in the prevalence of schemes over time may also be 

difficult to determine based on consumer complaints. For example, the 

increases in complaints from 2009 to 2011 may indicate a growing 

Limitations of Available Data
 

Page 15 GAO-14-17 Combating Foreclosure Rescue Schemes

awareness of foreclosure rescue schemes, prompting more victims to file 

complaints, rather than an actual increase in schemes. Similarly, 

increased efforts to collect complaint information, such as those made by 

the Lawyers’ Committee beginning in 2010, may have contributed to the 

rise in the number of complaints reported during this time period. The 

number of homeowners who were at least 60 days delinquent decreased 

during this time period, suggesting that factors other than the number of 

borrowers in danger of foreclosure influenced the increase in consumer 

complaints about foreclosure rescue schemes.

SAR data have similar limitations. As we noted in 2010, they also do not 

provide a precise measure of the prevalence of foreclosure rescue 

schemes or of trends in the prevalence of these schemes, for several 

reasons. Unlike consumer complaints, SARs are filed by financial 

institutions, which may not always be aware of the crime because 

perpetrators usually approach homeowners directly and may even advise 

them to cease communications with their lenders. In addition, FinCEN 

noted that most mortgage fraud SARs report suspected fraud that directly 

affects the lender, such as false statements on loan applications, rather 

than fraud against the borrower, such as foreclosure rescue schemes. 

FinCEN analysts also noted that mortgage fraud SARs were typically filed 

2 or more years after the suspicious activity began, generally due to 

financial institutions’ lack of awareness of wrongdoing at the time the 

activity occurred. This time lag may make it difficult to determine trends. 

As noted previously, increased awareness of the issue may also have 

encouraged financial institutions to report foreclosure rescue schemes. In 

addition to the June 2010 advisory discussed earlier, FinCEN noted that a 

number of well-publicized federal investigations, enforcement actions, 

reports, bulletins, and guidance also likely increased awareness and 

underscored the importance of reporting these schemes.

Several agency officials and representatives of nonprofits told us that 

foreclosure rescue schemes had become more complex over time. For 

example, we noted in 2010 that there were two primary types of schemes: 

those that charged homeowners an up-front fee for a loan modification 

that was never provided (advance-fee scheme), and those that 

transferred ownership of a house to a third party to avoid foreclosure 

(sale-leaseback scheme). Officials we contacted for this report, however, 

described several other types of schemes that had become common. 

FTC and others have also issued public education material that describes 

these kinds of schemes. While these schemes also often involve advance 

fees, they tend to be more complex, as described below.

More Complex Schemes 

Have Emerged, and Some 

Groups Continue to Be 

Targeted
 

Page 16 GAO-14-17 Combating Foreclosure Rescue Schemes

• Forensic audits. Schemes in which the scammer offers to review a 

homeowner’s mortgage loan documents to determine whether the 

lender complied with state and federal mortgage lending laws. For 

example, in a case brought by FTC, the alleged scammers claimed on 

their website that “up to 95 percent of mortgages may be legally 

unenforceable due to defects like lost documents, improper notices, 

appraisal and/or predatory lending.”26 Using this claim, they said the 

results of the “forensic audits” they provided would help consumers 

negotiate a loan modification to avoid foreclosure, according to the 

FTC complaint.27 They also promised that, for a fee, consumers could 

obtain mortgage modifications with reduced interest rates and lower 

monthly mortgage payments.28

• Bankruptcy to avoid foreclosure. Schemes in which scammers 

promise to negotiate a loan modification with the lender for a fee. 

However, instead of contacting the lender, the scammer files a 

bankruptcy case in the homeowner’s name, sometimes without the 

homeowner’s knowledge. Officials with the Executive Office for U.S. 

Trustees told us that because the bankruptcy process temporarily 

halts all debt collection efforts, including foreclosure proceedings, the 

homeowner believed that the scammer had helped in avoiding 

foreclosure. In some cases, the homeowner continues to pay regular 

fees to the scammer, believing that the scammer is still helping. The 

officials reported that from 2009 through 2012, they had made 45 

criminal referrals to law enforcement based on foreclosure rescue 

schemes and brought 191 formal and informal civil actions. Consumer 

complaints in the LMSPN database involving such schemes have 

increased. In 2010, only 4 percent of complaints about foreclosure 

rescue schemes indicated that bankruptcy services had been offered 

to them, but this percentage increased to 10 percent in the first 4 

months of 2013. However, consumer complaints may undercount the 

proportion of schemes involving bankruptcy because consumers may 

not be aware that scammers have filed bankruptcy cases in their 

names.

However, consumers often did not 

receive loan modifications and discovered too late that their houses 

were in foreclosure.

 

26FTC v. Consumer Advocates Group Experts, LLC, No. 2:12-CV-04736 (C.D. Cal. May 

30, 2012). 

27Id.

28Id.
 

Page 17 GAO-14-17 Combating Foreclosure Rescue Schemes

• Mass joinder lawsuits. Schemes in which the scammer, usually a 

lawyer or law firm, will promise the homeowner that the lender can be 

forced to modify the loan through this type of legal action.29 While 

mass joinder lawsuits can be used legitimately, the lawyers bringing 

them are usually paid only if the lawsuit is successful. Fraudulent 

mass joinder schemes, in contrast, require the homeowner to pay a 

fee to participate in the lawsuit. In one mass joinder scheme—which 

was halted at the request of FTC—the scammers were only posing as 

a law firm and engaged actual attorneys only briefly to file lawsuits.30

Once the lawsuits were filed and the scammers were paid, the 

scammers failed to follow through with the lawsuits, leaving 

homeowners in the same or worse financial shape than before, FTC 

alleged.31 According to FTC, the scammers charged each homeowner 

$6,000 to $10,000 in advance fees.32

• Short sale schemes. Schemes in which scammers, sometimes called 

“short sale negotiators” or “short sale processors,” promise to 

expedite a short sale and usually require the homeowner to pay a fee 

for these services. In one type of short sale scheme, “short sale 

negotiators” guarantee a short sale approval in exchange for an 

advance fee. The “short sale negotiator” takes the fee and does little 

or nothing in return.

Many of the officials we contacted told us that attorney involvement in 

foreclosure rescue schemes had become a concern in recent years. The 

Lawyers’ Committee also reported a recent increase in complaints citing 

legal representation (see fig. 4). This increase may be associated, in part, 

with the MARS rule’s exemption for attorneys. Further, Lawyers’ 

Committee data through February 2013 showed that schemes with 

attorney involvement often resulted in higher losses for the homeowner. 

The average loss reported by homeowners alleging attorney involvement 

in a scheme was $3,449, compared with an average loss of $2,727 for 

homeowners reporting scams with no attorney involvement.

 

29In a mass joinder lawsuit of the type discussed in foreclosure rescue schemes, multiple 

parties with claims arising from the same or similar transactions are pooled as coplaintiffs. 

30FTC v. Lakhany, No. 8:12-CV-00337 (C.D. Cal. Mar. 5, 2012).

31Id.

32Id.

Schemes Involving Attorneys 
 

Page 18 GAO-14-17 Combating Foreclosure Rescue Schemes

Figure 4: Foreclosure Rescue Schemes Alleging Attorney Involvement, March 2010-February 2013

The offices of state attorneys general also reported receiving consumer 

complaints alleging attorney involvement in schemes. For example, a 

representative of the Illinois state attorney general’s office told us that of 

the complaints her office received on foreclosure rescue schemes, 

roughly 70 percent of them involved lawyers or law firms. In addition, a 

representative from the California state attorney general’s office noted 

that despite the lack of an attorney exemption in California’s advance-fee 

ban, the number of reported schemes involving attorneys had risen there 

as well.

The apparent increase in the prevalence of schemes involving attorneys 

has created new challenges for law enforcement. First, stakeholders 

noted that it could be difficult to determine whether attorneys were 

actually providing legitimate services. For example, while the MARS rule 

prohibits companies from instructing consumers not to contact their 
 

Page 19 GAO-14-17 Combating Foreclosure Rescue Schemes

lenders, this practice may be permitted if the foreclosure-assistance 

provider is an attorney.33 In commenting on FTC’s proposed MARS rule, 

the American Bar Association (ABA) noted that clients typically expected 

attorneys they retained to act as their representatives in dealing with 

other parties, such as lenders and servicers, and that up-front fees, such 

as a retainer, were typically required by attorneys providing legitimate 

legal services.34

ABA has taken some steps to address attorney involvement in

foreclosure rescue schemes. In 2010, ABA’s Section of Individual Rights 

and Responsibilities (IRR) received approval from ABA’s Board of 

Governors to work with LMSPN. In 2011, IRR created a special advisory 

group of ABA Committees and Sections that has been involved in 

combating foreclosure rescue schemes. The purpose of the special 

advisory group is to examine the issue of lawyer participation in loan 

modifications and foreclosure rescue schemes and to develop an action 

plan to deter lawyers from participating in these schemes. A 

representative of the group noted that it would be proposing a policy 

resolution for possible ABA adoption and would educate ABA members 

on this issue. IRR expects to present the resolution to ABA’s House of 

Delegates legislative session in February 2014. In addition, several state

However, an attorney acting for a company perpetrating 

a scheme may not actually act on the client’s behalf and may be brought 

in only for a short period to file certain documents. As a result, 

determining in whose interest the attorney is acting in such cases can be 

difficult. Further, attorney-client privilege can present another challenge. 

One state official noted that attorneys could cite attorney-client privilege 

as a way to avoid subpoenas and slow down investigations, allowing 

companies to continue with their schemes and defraud homeowners. In 

addition, disciplining attorneys can be a challenge. For example, one 

state official said that a separate disciplinary group existed for lawyers but 

that this group did not have law enforcement authority and could 

investigate only individual lawyers with a license in that state. In addition, 

this group cannot pursue a case in which the name of a law firm, rather 

than an individual, is used. Finally, investigations by these disciplinary 

groups are confidential, making it difficult for law enforcement agencies, 

such as the state attorney general’s office, to work with them.

 

3312 C.F.R. § 1015.7(a).

34Mortgage Assistance Relief Services, 75 Fed. Reg. 75092, 75106, 75127 (Dec. 1, 

2010).
 

Page 20 GAO-14-17 Combating Foreclosure Rescue Schemes

bar associations have issued ethics alerts, warning attorneys in their 

states against becoming involved in these schemes.

We noted in 2010 that some state officials said they were aware of 

foreclosure rescue schemes that targeted particular communities. 

Officials we spoke with for this report noted that some populations 

continued to be the targets of these schemes. For example, a U.S. 

Trustee Program official noted that schemes involving bankruptcy to 

avoid foreclosure had targeted minority communities. In addition, 

available data and other representatives we spoke with continued to 

indicate that minority populations could be particularly vulnerable to these 

schemes. According to the LMSPN database, complaints filed by black or 

African American homeowners have increased since 2010. In 2010, 17 

percent of complaints were filed by this group, compared with 20 percent 

in 2011, 22 percent in 2012, and 23 percent in the first 4 months of 2013. 

Representatives of the National Community Reinvestment Coalition also 

said that they had received more than 50 complaints about an attorney 

who had targeted mostly African-American and Latino communities for his 

scheme. The attorney told consumers that he had working relationships 

with various federal agencies and programs, took up-front fees from 

them, and did not provide any services. In another example, FTC filed two 

cases against telemarketers who targeted Spanish-speaking 

homeowners, promising mortgage modifications in exchange for large upfront fees.35

In addition, older homeowners appear to be common targets for 

foreclosure rescue schemes. According to the Lawyers’ Committee, 

seniors (defined as those 51 years or older) are among the hardest hit by 

rescue schemes. As of October 2012, 49 percent of complaints in 

LMSPN’s database were filed by those 51 or older. The average loss 

reported by seniors was $3,129, compared with the overall average loss 

of $2,997. Additionally, an FBI bulletin warns of schemes in which seniors 

in danger of foreclosure are led to believe they may obtain a reverse 

 

35FTC v. Freedom Companies Marketing, Inc., No. 1:12-CV-05743 (N.D. Ill. July 23, 

2012).

Schemes Targeting Specific 

Populations
 

Page 21 GAO-14-17 Combating Foreclosure Rescue Schemes

mortgage.36

Some foreclosure rescue schemes have associated themselves with 

government programs that assist homeowners. For example, a Lawyers’ 

Committee representative told us that some have capitalized on 

Treasury’s Hardest Hit Fund program, federal settlement funds, and the 

Emergency Home Loan Program by claiming that they could help 

homeowners access these programs.

In these schemes, seniors are informed that they do not 

qualify for a reverse mortgage but that they do qualify for another type of 

mortgage that can help save them from foreclosure. According to the FBI 

bulletin, the perpetrators locate an investor willing to act as a straw buyer 

(a person who pretends to be a legitimate buyer but is actually purchasing 

on behalf on another person); order fraudulent home repairs; complete an 

inflated appraisal; and obtain a forward mortgage subsequently 

transferring the property away from the seniors and pocketing the equity. 

The victims lose the equity in their home and may be told to repurchase 

the property from the scammer or lose it altogether.

37 In one instance, a group known 

as the National Legal Help Center claimed that, for a fee, it could assist 

homeowners in getting benefits from the National Mortgage Settlement.38

In addition, this group falsely claimed that it was associated with IFR.39

 

36A reverse mortgage is a loan that converts the borrower’s home equity into payments 

from a lender and typically does not require any repayments as long as the borrower 

continues to live in the home. These loans are available to homeowners 62 and older and 

have become an increasingly popular financial tool for seniors. See GAO, Reverse 

Mortgages: Product Complexity and Consumer Protection Issues Underscore Need for 

Improved Controls over Counseling for Borrowers. 

Websites and announcements for programs such as HAMP, the National 

Mortgage Settlement, and IFR now have warnings about scams and the 

availability of free legitimate help, but a Lawyers’ Committee 

representative noted that such alerts had not always been included in 

earlier communications with homeowners.

GAO-09-606 (Washington, D.C.: June 

29, 2009).

37The Hardest Hit Fund is a Treasury program that provided $7.6 billion to the 18 states 

hardest hit by recent housing and economic downturns, plus the District of Columbia, to 

develop locally-tailored programs to assist struggling homeowners in their communities. 

The Emergency Home Loan Program is a HUD program that provided declining balance, 

deferred payment loans to homeowners in states not covered by the Hardest Hit Fund. 

38CFPB v. Najia Jalan (d/b/a National Legal Help Center), No. 8:12-CV-02088 (C.D. Cal. 

Dec. 3, 2012).

39Id.

Schemes Taking Advantage of 

Existing Programs and 

Processes to Assist or 

Remediate Borrowers
 

Page 22 GAO-14-17 Combating Foreclosure Rescue Schemes

The Lawyers’ Committee representative also noted that the sheer number 

of government programs might provide opportunities for dishonest actors 

to confuse homeowners, making them unsure where to turn for legitimate 

help. A representative of the Homeownership Preservation Foundation 

(HPF), which runs the Homeowner’s HOPE Hotline, noted that complaints 

related to rescue schemes had spiked in March 2012 and January 

2013.40

 

40Complaints received by the Homeowner’s HOPE Hotline are submitted to the LMSPN 

complaint database, which submits its complaint data to FTC’s Consumer Sentinel 

Network. 

The March 2012 spike may be related to the first wave of IFR’s 

national advertising campaign (January-February 2012), along with the 

announcement of the National Mortgage Settlement (February 2012). The 

January 2013 spike followed announcements of IFR payment agreements 

in January 2013 (see fig. 5).
 

Page 23 GAO-14-17 Combating Foreclosure Rescue Schemes

Figure 5: Timeline of Government Announcements and Number of Foreclosure Rescue Scheme Complaints Submitted to the 

HOPE Hotline

Agency officials and representatives of other organizations continued to 

cite the challenges to combating these schemes that we noted in 2010. 

For example, law enforcement officials continued to note that the ability of 

scammers to start up and shut down quickly made it difficult to combat 
 

Page 24 GAO-14-17 Combating Foreclosure Rescue Schemes

these schemes. In addition, some said that scammers could operate 

under different names, making them difficult to track. A few stakeholders 

noted that the small dollar amounts of individual losses presented a 

challenge because federal agencies were less likely to be able to take on 

the cases. However, as we noted in 2010, it may be easier for state 

attorneys general to pursue these cases. Finally, we noted in 2010 that 

officials had told us that it was essential to encourage consumers to 

report suspicious incidents to authorities. As noted above, agency officials 

and representatives of nonprofit organizations we spoke with for this 

report also said that consumers might not report potential schemes, either 

because they were not aware that they were being victimized or were too 

embarrassed to report it. They cited consumers’ unwillingness to report 

these schemes as an ongoing challenge.

Since we last reported on this issue in 2010, FFETF and its members 

have undertaken a number of activities intended to enhance coordination 

among federal, state, and local authorities responsible for combating 

foreclosure rescue schemes. These efforts are consistent with the three 

key elements of GAO’s fraud prevention model: (1) preventive controls, 

(2) detection and monitoring, and (3) investigations and prosecutions.41

FFETF’s preventive efforts have focused on educating consumers about 

these schemes to help them avoid becoming victimized. FFETF and its 

members have also made efforts to enhance the reporting of potential 

incidents by both consumers and financial institutions to aid in the 

detection and monitoring of these schemes. FFETF member agencies 

that we contacted told us that one of the key outcomes of the task force 

had been greater information sharing and coordination among 

enforcement agencies regarding these schemes that facilitated 

investigations and prosecutions.

 

41GAO-07-418T. 

FFETF Members 

Have Focused on 

Prevention, Detection, 

and Enforcement to 

Combat Foreclosure 

Rescue Schemes
 

Page 25 GAO-14-17 Combating Foreclosure Rescue Schemes

Members of FFETF’s MFWG have focused their outreach efforts on 

raising public awareness of foreclosure rescue schemes in order to 

prevent homeowners from being victimized. The results of our prior work 

serve to emphasize the overall lesson learned that fraud prevention is the 

most effective and efficient means to minimize fraud, waste, and abuse.42

MFWG has used a variety of approaches to consumer education and 

outreach that are outlined in MFWG’s annual strategic scorecards, a 

management tool MFWG developed to track its progress in combating 

foreclosure rescue schemes.43

MFWG has held at least eight regional summits near areas that have 

been hardest hit by foreclosures since 2010. During the summits, 

homeowners and local law enforcement agencies received information on 

mortgage fraud trends from other law enforcement officials, victims, 

housing counselors, and industry experts. According to FFETF, the 

presenters represented law enforcement, victims, housing counselors, 

industry experts, and others who discussed mortgage fraud issues in the 

community, including foreclosure rescue schemes. In addition, MFWG 

noted that it held 27 events to educate homeowners, counselors and 

public advocates in fiscal year 2012, exceeding its target goal of 20 

events. These events included foreclosure prevention forums, training for 

consumer groups and legal services communities, and presentations to 

members or representatives of the armed forces. For example, in 2012 

two mortgage fraud summits in Las Vegas and Los Angeles included 

discussions on the impact of mortgage fraud on the community, trends in 

Examples of MFWG’s outreach and 

education efforts include holding regional education summits for 

distressed homeowners, housing counselors, and public advocates and 

directing more individuals to FFETF’s mortgage fraud information on its 

website, StopFraud.gov, which FFETF considers a one-stop site for 

consumers to learn how to protect themselves from becoming victims and 

to report cases of fraud.

 

42For example, see GAO-07-418T, 8(a) Program: Fourteen Ineligible Firms Received 

$325 Million in Sole-Source and Set-Aside Contracts, GAO-10-425 (Washington, D.C.: 

Mar. 30, 2010); and Low-Income Home Energy Assistance Program: Greater Fraud 

Prevention Controls Are Needed, GAO-10-621 (Washington, D.C.: June 18, 2010).

43The 2012 and 2013 MFWG strategic scorecards were created in response to our 2010 

recommendation that DOJ develop a comprehensive strategy for FFETF’s Mortgage 

Fraud Working Group’s efforts to combat mortgage fraud by developing clear, long-term 

strategies and performance measures that the working group can use to evaluate its 

progress toward achieving its long-term goal of increasing enforcement in the area of 

mortgage fraud. See GAO-10-787. 

MFWG Members Have 

Developed and 

Participated in Outreach to 

Educate Consumers about 

Schemes
 

Page 26 GAO-14-17 Combating Foreclosure Rescue Schemes

mortgage fraud, and ways to avoid becoming a victim. The Los Angeles 

summit was attended by officials and practitioners involved in mortgage 

fraud enforcement and prevention and included representatives such as 

the FBI, FTC, HUD, California Attorney General’s Office, California State 

Bar, California Department of Real Estate, and other federal, state, 

county, and local agencies, including the Los Angeles County Department 

of Consumer Affairs. 

Individual MFWG members and nonprofit organizations have also 

conducted outreach as a part of their own efforts to increase awareness 

of foreclosure rescue schemes. For example, HUD’s “Know it. Avoid it. 

Report it.” information campaign alerts homeowners to the availability of 

free housing counselors who can help with foreclosure issues and provide 

information on avoiding foreclosure schemes. According to HUD, the 

information campaign merges the efforts of NeighborWorks, the Lawyers’ 

Committee, and the Homeowner’s HOPE Hotline to provide an “early 

warning system” that helps homeowners protect themselves and their 

homes, while also providing the tools necessary to report schemes to 

enforcement authorities. HUD targets its information campaign to areas 

with the highest rates of foreclosure using multiple kinds of outreach. One 

official told us that in 2011, the HUD campaign delivered information on 

schemes via television, radio, and print advertisements to the areas 

affected by high rates of foreclosure. In 2012, HUD shifted its outreach to 

these areas to digital and radio-based mediums.

According to the MFWG strategic scorecard, the mortgage fraud 

prevention and victim assistance sections of the StopFraud.gov website 

received over 15,000 hits during fiscal year 2012. The mortgage fraud 

and victim assistance sections contain links to foreclosure rescue scheme 

resources and educational materials created by other federal agencies, 

such as FTC, SIGTARP, and nonprofit organizations such as 

NeighborWorks. For example, the mortgage fraud webpage links to 

SIGTARP, CFPB, and Treasury’s joint alerts titled “Tips for Avoiding 

Mortgage Modification Scams” and "Avoiding HAMP Mortgage 

Modification Scams; Resources for Servicemembers," and directs 

individuals to the websites of other agencies and nonprofit organizations, 

such as NeighborWorks, LoanScamAlert.org, and the Mortgage Bankers 

Association Consumer Help Desk. SIGTARP officials told us that 

promoting StopFraud.gov and the associated foreclosure rescue scheme 

resources allows individuals to better protect themselves from 

victimization. According to FFETF’s first year report, FFETF has also 

partnered with LMSPN members, Fannie Mae, Freddie Mac, the Lawyers’ 

Committee, and NeighborWorks to support PreventLoanScams.org, 
 

Page 27 GAO-14-17 Combating Foreclosure Rescue Schemes

which supports national, state, and local law enforcement efforts to fight 

mortgage fraud.44

Most individual members of MFWG with whom we spoke had also 

developed web pages that provided information on foreclosure rescue 

schemes or directed consumers to the Lawyers’ Committee and 

NeighborWorks websites on foreclosure rescue schemes. Six of the 

seven MFWG member agencies we spoke with had specific information 

on foreclosure rescue schemes on their websites, including descriptions 

of schemes and information on how to submit a complaint. In addition, 

several agency and nonprofit organizations’ websites emphasize that 

borrowers do not need to pay for loan modification assistance. Six of the 

seven MFWG member agencies we interviewed posted information on 

their websites about the free assistance that is available to borrowers who 

are at risk of foreclosure.

The website provides tips on how to avoid schemes, 

information on how to obtain assistance through free housing counseling, 

and an accessible complaint form that can be filled out online and then 

entered into the LMSPN complaint database.

MFWG member agencies have continued to collect data on foreclosure 

rescue schemes in order to support efforts to detect and combat them.45

Since 2010, MFWG and others have made efforts to improve the 

collection of consumer complaints related to foreclosure rescue schemes. 

Agency officials and nonprofit representatives told us that they collected 

information on the borrower, the services they were offered, the amount 

they paid for the services, and any contact information for the individual or 

company that offered the service. They explained that individuals could 

submit their complaints through the detailed LMSPN complaint forms, 

housing counselors staffing the Homeowner’s HOPE Hotline’s dedicated 

team, or individual agency hotlines. Agencies might also receive 

complaints through referrals from enforcement agencies, mail, and 

emails.

 

44FFETF, First Year Report: Financial Fraud Enforcement Task Force 2010 (Washington, 

D.C.: 2010).

45Compiling complaint data and establishing mechanisms to identify the existence of fraud 

are detection efforts associated with federal government standards for internal controls. 

See GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

Federal Detection Efforts 

Continue to Focus on 

Enhanced Incident 

Reporting
 

Page 28 GAO-14-17 Combating Foreclosure Rescue Schemes

For example, the working group achieved its goal of increasing the 

number of states reporting consumer complaints to FTC’s Consumer 

Sentinel Network from 9 to 14 in 2012, and set a goal for 20 states by the 

end of 2013.46

Agencies have also continued to make use of available information to aid 

investigations. In 2010, we reported that FinCEN provided enforcement 

authorities with investigative information on SAR filings and other data to 

help develop leads on potential foreclosure rescue schemes. FinCEN 

officials told us that FinCEN had conducted additional analysis in support 

of investigative cases for more than 20 state and federal agencies. In 

addition, state and federal officials told us that they could access 

complaint information to help develop leads against the criminals 

perpetrating the schemes. For example, officials from FTC said that its 

staff members often started their investigations by focusing on companies 

and individuals associated with a high number of complaints in FTC’s

Consumer Sentinel Network. Similarly, a U.S. attorney we spoke with 

stated that his office regularly consulted several databases, including the 

Consumer Sentinel Network, when trying to develop leads for their 

investigations. Other individuals we spoke with said that they also used 

the databases to find additional information for their ongoing 

investigations. For example, a representative from one of the attorney 

generals’ offices whom we interviewed stated that investigators might 

search the Consumer Sentinel Network for complaints with variations of a 

certain attorney’s name. Another state official from a state attorney 

general’s office told us that the office generally used the Consumer 

In addition, CFPB has begun collecting consumer 

complaints about these schemes and submits them to the FTC’s 

Consumer Sentinel Network. Also, LMSPN created a standardized 

complaint form that is used by all of its government and nonprofit 

partners. According to Lawyers’ Committee representatives, partner 

organizations have links to the online form on their websites and the form 

is also made available at homeowner events, such as Making Home 

Affordable Program events and during conversations between servicers 

or housing counselors and borrowers. As of April 30, 2013, nearly threequarters of the foreclosure rescue scheme complaints in FTC’s Consumer 

Sentinel Network database had been submitted through LMSPN

complaint database. 

 

46By the end of 2012, 13 states had begun reporting complaint information to the 

Consumer Sentinel Network, but the 14th state was added in January 2013. 
 

Page 29 GAO-14-17 Combating Foreclosure Rescue Schemes

Sentinel Network to determine whether additional victims were associated 

with an individual or company in order to more effectively calculate 

restitution.

MFWG members have also sought mechanisms to help financial 

institutions more easily identify suspected mortgage fraud, including 

foreclosure rescue schemes. As previously discussed, FinCEN issued an 

advisory in June 2010 encouraging SAR filers to use “foreclosure rescue 

scam” in the narrative portion of the report to help law enforcement 

agencies more easily identify and isolate pertinent SARs. FinCEN officials 

also noted that as of March 2012, a specific checkbox for foreclosure 

rescue schemes was added to the SAR form, further facilitating the 

identification of these schemes. According to the officials, federal and 

state law enforcement and regulatory agencies continue to track SARs 

reporting foreclosure rescue schemes, as these reports provide insight 

into trends for this crime and leads for the initiation and support of 

investigations and enforcement efforts. MFWG co-chairs discuss the SAR 

filings and other complaint data twice a year as part of their ongoing effort 

to identify emerging trends in foreclosure rescue schemes.

Multiple representatives of MFWG member agencies that we contacted 

told us that MFWG had facilitated information sharing and coordination 

among enforcement agencies on investigations. During MFWG meetings, 

members discuss the best way to coordinate on emerging trends in 

foreclosure rescue schemes and enforcement jurisdiction. One FTC 

official noted that MFWG had been beneficial because it enabled 

members to make connections with officials from other agencies with 

whom they might not otherwise interact. Officials from the Executive 

Office for the U.S. Trustees told us that some of their working 

relationships were a direct outgrowth of their membership in FFETF. For 

example, the office did not have any contact with SIGTARP until it 

became part of the working group. Since beginning to share information, 

the two entities have been able to develop a case against perpetrators of 

a national mortgage foreclosure rescue scheme. In addition, according to 

a FFETF representative, the Los Angeles and Las Vegas mortgage fraud 

summits held to reach out to homeowners also served the purpose of 

convening federal, state, and local enforcement agencies to discuss how 

to improve their regional enforcement coordination efforts.

Between 2009 and 2012, working group members using joint 

investigations and broad enforcement initiatives coordinated their 

investigations and successfully filed criminal charges against more than 

MFWG Has Focused on 

Facilitating Information 

Sharing and Coordination 

as Key Efforts to Enhance 

Enforcement
 

Page 30 GAO-14-17 Combating Foreclosure Rescue Schemes

226 defendants allegedly involved in foreclosure rescue schemes. In 

2010, we discussed MFWG’s efforts to prosecute individuals and 

companies perpetrating schemes through Operation Stolen Dreams, a 

series of federal and state law enforcement actions undertaken by 

agencies represented on FFETF. DOJ reported that Operation Stolen 

Dreams involved 119 criminal defendants allegedly involved in 

foreclosure rescue schemes—and more than 100 civil enforcement 

actions that pertained to the schemes. In August 2013, MFWG members 

announced the results of the Distressed Homeowners Initiative, a yearlong coordinated enforcement effort conducted by members of MFWG in 

fiscal year 2012. While Operation Stolen Dreams had a broader focus on 

mortgage fraud, the Distressed Homeowners Initiative specifically 

targeted fraud that preyed on homeowners, such as foreclosure rescue 

schemes. DOJ officials told us that the initiative included undercover work 

and an enforcement surge led by FBI in Southern California. They also 

said that FBI compiled information packages on potential targets, which it 

shared with its field offices across the country. The initiative targeted 

perpetrators both civilly and criminally and, according to DOJ, resulted in 

criminal charges against 107 defendants. The estimated losses to at least 

17,185 victims totaled more than $95 million. Cases were also filed 

against 128 civil defendants in federal courts across the country. In these 

cases, at least 19,198 victims suffered an estimated total loss amount of 

$54 million.47

Federal enforcement agencies have successfully coordinated 

investigations beyond the broad enforcement initiatives discussed earlier. 

SIGTARP officials stated that FFETF’s success is due to members’ ability 

 

47DOJ originally announced the results of the Distressed Homeowners Initiative in October 

2012. DOJ initially reported that more than 200 companies were shut down and criminal 

charges were filed against 530 defendants as a result of the sweep. DOJ also reported 

that the cases involved losses of more than $1 billion from more than 73,000 victims 

across the country. However, in response to questions being raised about their report and 

an extensive review of the reported cases, DOJ found that the October 2012 public 

announcement overstated the number of defendants that should have been included as 

part of the Distressed Homeowner Initiative, as well as the corresponding estimated loss 

amount and number of victims. Specifically, DOJ found that the original figures included 

not just criminal defendants who had been charged in fiscal year 2012, as reported, but 

also a number of defendants who were the subject of other prosecutorial events—such as 

a conviction or sentence—in fiscal year 2012. In addition, the original announcement 

included a number of defendants who were charged in mortgage fraud cases in which the 

victim(s) did not fit the narrow definition of distressed homeowner that the initiative 

targeted.
 

Page 31 GAO-14-17 Combating Foreclosure Rescue Schemes

to work more efficiently together than as individual agencies. SIGTARP 

reported that 43 of its criminal investigations relating to foreclosure rescue 

schemes were multiagency efforts between 2009 and 2012. In addition, 

FTC officials told us that 14 of their 36 cases involving foreclosure rescue 

schemes were conducted in partnership with other agencies during that 

same period and that these partnerships were a direct outgrowth of their 

membership in FFETF. FHFA’s Office of the Inspector General also 

coordinated on 12 cases with other FFETF members between 2011 and 

2012.

Some agency officials told us that foreclosure rescue scheme cases did 

not comprise a large proportion of their workload. For example, FHFA 

officials told us that the majority of cases FHFA filed involved loan 

origination fraud. However, FTC officials told us that 36 of the agency’s 

363 consumer protection cases involved the MARS rule and foreclosure 

rescue schemes between 2009 and 2012—a relatively substantial portion 

given the wide range of consumer protection issues FTC covers. In 

addition, officials told us that many investigations related to foreclosure 

rescue schemes were conducted at the state level. For example, in 2010, 

the Florida Attorney General’s Office filed 19 civil cases for foreclosure 

rescue schemes, representing 8.4 percent of its caseload for that year. 

An official from the California Attorney General’s Office told us that 

between 2009 and 2012 its office filed 20 criminal cases and an 

estimated 10 to 15 civil cases for foreclosure rescue schemes. Officials 

from the Arizona Attorney General’s Office told us that it received nearly 

5,000 complaints relating to foreclosure rescue schemes between 2009 

and 2012 and successfully litigated 23 civil cases during that same time.

MFWG has also identified other areas of focus in its enforcement efforts, 

including shutting down or forcing into compliance confusing, misleading,

or fraudulent web advertisers and websites and conducting training for 

DOJ attorneys and prosecutors, state and local attorneys, and 

investigators. For example, according to the MFWG strategic scorecard, 

Treasury, SIGTARP, and FTC took action against over 800 confusing, 

misleading, or fraudulent websites in fiscal year 2012. Treasury officials 

told us that they conducted web scans in order to identify unauthorized 

uses of Treasury program trademarks or misrepresentations of programs. 

Between 2009 and 2012, Treasury issued notices of trademark 

infringement (cease-and-desist letters) to owners of approximately 400 

websites for unauthorized use of Treasury program trademarks. In 

addition, SIGTARP officials told us that they contacted Internet search 

engines (e.g., Google, Yahoo, Bing) to take down over 200 alleged 

fraudulent websites. They noted that subsequently, these companies 
 

Page 32 GAO-14-17 Combating Foreclosure Rescue Schemes

suspended relationships with 900 web advertising agencies related to the 

alleged fraudulent websites. 

Another of MFWG’s ongoing efforts is mortgage fraud training and 

outreach to law enforcement attorneys and industry representatives. For 

example, DOJ, FBI, and inspectors general from FHFA and HUD 

conducted 25 training events in 2012 for state and local attorneys and 

investigators across the country. Officials from the FHFA inspector 

general’s office told us that the office had coordinated with the National 

District Attorneys Association to conduct such training for state attorneys 

general. The officials also said that the office also did outreach to industry 

representatives, including the Mortgage Bankers Association, the 

National Association of Appraisers, and the National Association of 

Mortgage Regulators. MFWG members said that their outreach and 

enforcement efforts would continue in order to educate homeowners and 

prevent more from falling victim to schemes.

Most agency officials we spoke with said that they did not specifically 

track the amount of resources dedicated to combating foreclosure rescue 

schemes, but some federal and state officials noted resource limitations 

as a challenge. A U.S. Trustee official told us that limited resources were 

a challenge and that he could not be sure whether resource constraints 

would allow for the same level of effort in combating foreclosure rescue 

schemes in the future. The U.S. Trustee Program’s 2013 Budget Request 

notes that these schemes are complex and require the retention and 

training of specialized attorneys and other staff. Other officials told us that 

more cases could be pursued if more resources were available, but some 

officials said that resources were not a limiting factor in the amount of 

enforcement activity. Representatives of nonprofit organizations we spoke 

with cited limited resources as a constraint. For example, a 

NeighborWorks representative noted that finding adequate resources had 

been a challenge and that its Loan Scam Alert campaign had not been 

able to purchase as much paid advertising as it would have liked. As a 

result, the representative noted that the campaign may not have been 

receiving as much television coverage as the schemes were.

Available data suggest that foreclosure rescue schemes continue to be a 

concern, and federal agencies and others have increased their efforts to 

combat these schemes in recent years. Our fraud prevention framework 

highlights that increased awareness of fraud is crucial to preventing 

individuals from falling victim to fraudulent situations. Homeowners who 

have adequate information on foreclosure rescue schemes and legitimate 

sources of assistance will be more likely to understand and make more 
 

Page 33 GAO-14-17 Combating Foreclosure Rescue Schemes

informed decisions when seeking assistance. Federal agencies will need 

to continue to coordinate their outreach, detection, and enforcement 

efforts to increase awareness among homeowners and prevent more 

from falling victim to schemes.

We provided a draft of this report for review and comment to the heads of 

the Departments of Justice, Housing and Urban Development, and the 

Treasury, the Consumer Financial Protection Bureau, the Federal 

Housing Finance Agency, Fannie Mae, Freddie Mac, the Federal Trade 

Commission, the Special Inspector General for the Troubled Asset Relief 

Program, and the U.S. Postal Inspection Service. We received written 

comments from the Assistant Secretary for Financial Stability at the 

Department of the Treasury and SIGTARP, which are summarized below 

and reprinted in appendices II and III, respectively. DOJ, HUD, FHFA, 

FTC, SIGTARP, Treasury, and the U.S. Postal Inspection Service 

provided technical comments that were incorporated, as appropriate.

In its written comments, Treasury noted that it valued GAO’s insights as it 

continues to combat foreclosure rescue schemes. Treasury reiterated that 

the Office of Financial Stability conducts daily website scans to identify 

unauthorized uses of Treasury program trademarks or misrepresentations 

of programs, and has issued notice of trademark infringement to owners

of approximately 400 websites. Treasury also highlighted that the Office 

of Financial Stability conducts preliminary investigations into allegations 

of foreclosure rescue schemes related to the Troubled Asset Relief 

Program, the findings of which may result in referrals to SIGTARP and 

other law enforcement agencies, and has partnered with CFPB to provide 

the public with tips and alerts for avoiding mortgage modification 

schemes. 

In its technical comments, SIGTARP noted that it is an independent entity 

within Treasury and is not subject to the supervision of the Secretary. As 

such, SIGTARP requested that we separate our discussion of SIGTARP 

from our discussion of Treasury. In response, we listed SIGTARP as a 

separate agency from Treasury in our description of agencies’ roles in 

combating foreclosure rescue schemes. In addition, SIGTARP noted that 

the draft report did not reflect the work of the FFETF’s Rescue Fraud 

Working Group, which also plays a role in combating these schemes. We 

added a description of this working group and noted that SIGTARP is one 

of its co-chairs. SIGTARP in its written comments stated that it concurred 

with the sections of the report related to SIGTARP’s work and noted that 

Agency Comments 
 

Page 34 GAO-14-17 Combating Foreclosure Rescue Schemes

it has made significant progress in combating these schemes and will 

continue to work with law enforcement partners to investigate them.

We are sending copies of this report to the appropriate congressional 

committees and to the heads of the Departments of Justice, Housing and 

Urban Development, and the Treasury, the Consumer Financial 

Protection Bureau, the Federal Housing Finance Agency, Fannie Mae, 

Freddie Mac, the Federal Trade Commission, the Special Inspector 

General for the Troubled Asset Relief Program, and the U.S. Postal 

Inspection Service. In addition, the report will be available at no charge on 

the GAO website at http://www.gao.gov. 

If you or your staff have any questions concerning this report, please 

contact me at (202) 512-8678 or evansl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix IV. 

Lawrance Evans Jr.

Director, Financial Markets

and Community Investment
 

Page 35 GAO-14-17 Combating Foreclosure Rescue Schemes

List of Addressees

The Honorable Tim Johnson 

Chairman 

The Honorable Mike Crapo 

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate 

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters 

Ranking Member

Committee on Financial Services 

United States House of Representatives
Appendix I: Scope and Methodology

Page 36 GAO-14-17 Combating Foreclosure Rescue Schemes

To examine the nature and prevalence of mortgage foreclosure rescue 

and loan modification schemes, we analyzed available information on 

consumer complaints about foreclosure rescue schemes from the Federal 

Trade Commission’s (FTC) Consumer Sentinel Network, as well as the 

Lawyers’ Committee for Civil Rights Under Law’s Loan Modification Scam

Prevention Network (LMSPN) database. In addition, we examined 

published information on the number of Suspicious Activity Reports 

related to foreclosure rescue schemes. We spoke with officials and 

representatives who manage these databases about their data collection 

processes and internal quality controls and tested the data where 

applicable. We found FTC’s Consumer Sentinel Network, LMSPN, and 

SAR data to be sufficiently reliable for the purpose of discussing the 

nature and prevalence of foreclosure rescue schemes in this report. We 

recognize that the total number of foreclosure rescue schemes reported 

does not capture all occurrences of schemes; however it captures the 

available information on this area of fraud. We also contacted seven 

member agencies of the Financial Fraud Enforcement Task Force’s 

(FFETF) Mortgage Fraud Working Group (MFWG) that were active in 

combating foreclosure rescue schemes—the Consumer Finance 

Protection Bureau, the Department of Justice, the Federal Housing 

Finance Agency and its Office of Inspector General, FTC, the Department 

of Housing and Urban Development and its Office of Inspector General, 

the Department of the Treasury, the Special Inspector General for the 

Troubled Asset Relief Program, and the U.S. Postal Inspection Service. In 

addition, we contacted representatives of two government-sponsored 

enterprises, Fannie Mae and Freddie Mac, as well as the offices of the 

attorneys general from Indiana and the five states we spoke with for our 

2010 report—Arizona, California, Florida, Illinois, and New York—states 

with some of the highest numbers of potential foreclosures. We also 

spoke with a number of nonprofit organizations that are actively 

addressing these schemes.

To determine the status and scope of the federal government’s 

multiagency effort and other major efforts to combat these schemes, we 

interviewed officials and obtained relevant documentation from FFETF 

and MFWG members listed previously. We also interviewed officials and 

obtained documents from the enterprises and nonprofit organizations that 

have undertaken major efforts in this area, including the National Fair 

Housing Alliance, the National Community Reinvestment Coalition, HOPE 

NOW, the Homeownership Preservation Foundation, and lead members 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 37 GAO-14-17 Combating Foreclosure Rescue Schemes

of LMSPN, including the Lawyers’ Committee for Civil Rights Under Law 

and NeighborWorks America.1 We also reviewed MFWG’s 2012 and 

2013 strategic scorecards to determine the activities the working group 

had completed. We also collected information on the number of civil and 

criminal foreclosure rescue scheme cases state and federal agencies 

pursued and reviewed individual agencies’ websites for information on 

foreclosure rescue schemes. We reviewed Standards for Internal Control 

in the Federal Government to identify requirements for effective internal 

controls related to fraud detection and prevention.2 Additionally, we 

looked at our past reviews of federal programs in which we identified the 

key elements of a framework for fraud prevention, detection, and 

prosecution.3

We conducted this performance audit from November 2012 to October 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Finally, we interviewed agency officials about their efforts to 

conduct outreach, collect consumer complaints, and conduct enforcement 

activities related to these types of schemes.

 

1

The National Fair Housing Alliance is a national organization dedicated to ending 

discrimination in housing through leadership, education and outreach, membership 

services, public policy initiatives, advocacy, and enforcement. The National Community 

Reinvestment Coalition seeks to increase fair and equal access to credit, capital, and 

banking services and products for low- and moderate-income communities. HOPE NOW 

is an alliance between counselors, mortgage companies, investors, and other mortgage

market participants that seeks to maximize outreach efforts to homeowners in distress to 

help them stay in their homes. The Homeownership Preservation Foundation is a 

nonprofit group that helps financially challenged homeowners navigate budget problems 

and avoid foreclosure. The Lawyers’ Committee for Civil Rights Under Law is dedicated to 

securing equal justice for all through the rule of law, targeting in particular the inequities 

confronting African Americans and other racial and ethnic minorities. NeighborWorks 

America was established under Title VI of the Housing and Community Development 

Amendments of 1978, Pub. L. No. 95-557, 92 Stat. 2080, 2115, as a congressionally 

chartered nonprofit organization dedicated to improving distressed communities. 

2

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

3

For example, see GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is the 

Key to Minimizing Fraud, Waste, and Abuse in Recovery Efforts, GAO-07-418T 

(Washington, D.C.: Jan. 29, 2007).
Appendix II: Comments from the Department 

of the Treasury

Page 38 GAO-14-17 Combating Foreclosure Rescue Schemes

Appendix II: Comments from the Department 

of the Treasury
Appendix III: Comments from the Special 

Inspector General for the Troubled Asset Relief 

Program

Page 39 GAO-14-17 Combating Foreclosure Rescue Schemes

Appendix III: Comments from the Special 

Inspector General for the Troubled Asset 

Relief Program
Appendix III: Comments from the Special 

Inspector General for the Troubled Asset Relief 

Program

Page 40 GAO-14-17 Combating Foreclosure Rescue Schemes
Appendix IV: GAO Contact and 

Staff Acknowledgments

Page 41 GAO-14-17 Combating Foreclosure Rescue Schemes

Lawrance L. Evans, Jr. (202) 512-8678 or evansl@gao.gov

In addition to the individual named above, other key contributors to this 

report were Harry Medina (Assistant Director), Rachel E. Batkins, 

Bethany M. Benitez, Emily Chalmers, Jena Sinkfield, Andrew Stavisky, 

Winnie Tsen, and James D. Vitarello.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments

(250695)
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