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. 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 homeowners facing potential foreclosure.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. Under HAMP, Treasury pays 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. mortgage servicers. 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.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 One of the provisions in principal reduction and other forms of loan modification relief nationwide. 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. 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 lender. 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. 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. CFPB reissued the MARS rule without substantive modification in December 2011. All of the states we spoke with reported having laws similar to the MARS rule. In addition, FTC reported that as of 2010, at least 30 states and the District of Columbia had enacted similar statutes or regulations. Except for California, all of the states we spoke with said they also had similar exemptions for attorneys. Since our report in 2010, data collected by federal agencies suggest that foreclosure rescue schemes have increased. 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. 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. Preliminary data for 2013 suggest that the number of complaints could increase for the year, as consumers had filed more than 7,000 of these complaints through April 30. 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.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 In addition, FTC officials reported that in 2009, the highest 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 public- private 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. 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. Treasury’s Financial Crimes Enforcement Network (FinCEN) receives SARs from financial institutions about suspected violations of financial laws and regulations.