California
State Manual
Loan Modification Scam Prevention Network
TABLE OF CONTENTS
TABLE OF CONTENTS ..........................................................................................................................2
Section 1 – Introduction .....................................................................................................................5
The Problem ..............................................................................................................................................................5
The Response .............................................................................................................................................................5
Role of Legal Volunteers ............................................................................................................................................6
This Manual ...............................................................................................................................................................6
Section 2 – The Problem .....................................................................................................................7
The Foreclosure Crisis in California............................................................................................................................7
Brief Overview of the California Foreclosure Process ...............................................................................................7
Non-Judicial Foreclosures ......................................................................................................................................7
Judicial Foreclosures ..............................................................................................................................................8
Loan Modification Scams ...........................................................................................................................................8
Why Is This A Problem?..........................................................................................................................................8
Common Types of Loan Scams...............................................................................................................................9
Section 3 – The Loan Modification Scam Prevention Network ........................................................... 11
Overview of the Loan Modification Scam Prevention Network ..............................................................................11
Response to the Crisis ..........................................................................................................................................11
The National Loan Modification Scam Database .....................................................................................................13
About the National Loan Modification Scam Database ......................................................................................13
Initial Complaint Report Sources..........................................................................................................................13
E-Support and Supplemental Online Complaints .................................................................................................15
The Federal Trade Commission ............................................................................................................................ 15
Enforcement Agencies and Non-Profit Partners Have Access..............................................................................16
Section 4 – Guide For Volunteers Working With Homeowners .......................................................... 17
Volunteering ............................................................................................................................................................17
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The Role of the Legal Volunteer ...........................................................................................................................17
Overall Process.....................................................................................................................................................17
Assigning Homeowners and Receiving Their Information .......................................................................................18
Conducting Interviews of Homeowners ..................................................................................................................18
Working with Homeowners ................................................................................................................................. 18
Tips for Successful Interactions with Homeowners..............................................................................................19
Obtaining Homeowner Documents .....................................................................................................................25
Tracking Progress and Closing a Matter ..............................................................................................................27
Volunteer Support ................................................................................................................................................28
Confidentiality of Homeowner and Alleged Scammer Information in Database .................................................28
Section 5 – Identifying and Avoiding Scams and Available Support Services for Victims...................... 30
Identifying Scams .....................................................................................................................................................30
Signs that a Company is Engaged in a Loan Modification Scam .........................................................................30
Alleged Loan Modification Scammers Operating in California ............................................................................31
Primary Anti-Loan Modification Scam Laws – State Specific ...................................................................................31
California Senate Bill 94 .......................................................................................................................................31
Mortgage Foreclosure Consultants Act (MFCA), Cal. Civ. Code § 2945 ...............................................................31
Foreclosure and Loan Scam Resources for Homeowners in California ...................................................................31
Appendix I – Applicable California Laws ............................................................................................ 32
California Statutes that Address Distressed Homeowner Scams ............................................................................32
Primary Anti-Loan Modification Scam Laws ........................................................................................................32
Laws Giving Rise to Civil Liability .........................................................................................................................37
Laws Giving Rise to Criminal Liability................................................................................................................... 38
California Rules of Professional Conduct Applicable to Attorneys Providing Services to Distressed Homeowners39
What is the California State Bar doing to address attorney misconduct involving homeowners at risk of
foreclosure? .........................................................................................................................................................39
Why are foreclosure consultants and attorneys teaming up to defraud homeowners experiencing mortgage-
related distress?...................................................................................................................................................39
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What types of attorney misconduct relating to foreclosure prevention services are regulated by the California
Bar?......................................................................................................................................................................39
Local Regulations that Address Distressed Homeowners Scams ............................................................................40
Los Angeles – Mortgage Modification Consultants (Los Angeles Municipal Code, Ch. IV, Art. 7.2) ......40
San Francisco – Regulations for Mortgage Modification Consultants (Ordinance 203-09, San Francisco
Police Code, Article 27) 43
Appendix II – California Loan Modification Scam Enforcement .......................................................... 47
Enforcement Efforts at the State Level....................................................................................................................47
California Attorney General’s Office .................................................................................................................... 47
California Department of Corporations ...............................................................................................................47
California Department of Real Estate ..................................................................................................................48
California State Bar ..............................................................................................................................................48
Enforcement Efforts at the Local Level ....................................................................................................................49
Local Offices and Agencies...................................................................................................................................49
Task Forces ..........................................................................................................................................................51
Websites – Additional California Fraud Resources ..................................................................................................52
General Mortgage Fraud Resources (including Loan Modification Scams) .........................................................52
Other National Resources ....................................................................................................................................53
Appendix III – Loan Modification scam complaint form ..................................................................... 54
Appendix IV – Loan Modification scam Interview questions .............................................................. 56
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SECTION 1 – INTRODUCTION
T HE P ROBLEM
As the foreclosure crisis sweeps across this nation, an underlying issue threatens to push homeowners further into
debt and slow our nation’s economic recovery – loan modification scams. Homeowners facing foreclosure are
especially vulnerable to scammers because they are often desperate to modify their loans. Too often, individuals
or companies purporting to offer assistance, instead offer phantom services for exorbitant fees or in other
instances persuade homeowners to enter into arrangements that result in losing their home or having their equity
stripped.
The instances of loan modification scams have risen sharply as foreclosures have climbed, and the foreclosure
crisis continues to grow rapidly. According to a January 2010 report by RealtyTrac, there were a record 2.8 million
foreclosure filings in 2009, a 21 percent increase over 2008 in such filings and a 120 percent increase over 2007.
States with the highest number of foreclosures are California, Florida, Arizona and Illinois, which accounted for 1.4
million foreclosure filings in 2009, over 50% of the national total. After these four states, Michigan, Nevada,
Georgia, Ohio, Texas and New Jersey had the highest number of such filings.
Minority communities, which have the highest rate of subprime loans, have been hit the hardest by the
foreclosure crisis. In last 15 years, homeownership rates rose more rapidly among all minorities than among
whites. But in recent years, Blacks and native-born Hispanics are among those who experienced the sharpest
reversal in homeownership since the start of the housing bust in 2005. The combination of the foreclosure crisis
and the increased incidence of predators scamming homeowners out of their hard earned savings has generated a
civil rights crisis of unprecedented proportions. Indeed, the loss of wealth amongst minorities is thought to be the
worst in the country’s history.
T HE R ESPONSE
As a result of the increase in loan modification scams, a coordinated national campaign has been initiated to
strengthen the fight against these alleged rescuers and support existing efforts at the national, state and local
levels. The lead organizations of this campaign includes Fannie Mae, Freddie Mac, the Lawyers' Committee for
Civil Rights Under Law (Lawyers' Committee) and NeighborWorks America. In addition, key governmental agencies
are participating, such as the U.S. Department of Housing and Urban Development (HUD), the Federal Trade
Commission, U.S. Department of Justice, the U.S. Treasury Department, the Federal Bureau of Investigation, and
state Attorneys General. Leading non-profit organizations from across the country are also partners in this effort,
including but not limited to the Homeownership Preservation Foundation, the National Fair Housing Alliance, the
National Coalition for Asian Pacific American Community Development (National CAPACD), and the National
Council of La Raza.
This national campaign includes two aspects. First, NeighborWorks is leading a national media and outreach
campaign to educate homeowners and the public on potential scams. Second, the Lawyers' Committee is
creating tools and resources to increase reporting and prosecution of alleged rescuers and to support ongoing
enforcement efforts at the federal, state and local levels. The enforcement aspect includes:
• Simplified Reporting Mechanism
• Creation of National Database
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• Support of State and Local Enforcement and Outreach
• Direct Homeowner Contact
• Public Education
State and federal government agencies have brought numerous civil and criminal charges against the scammers.
The broad coalition being put together by the Lawyers’ Committee and its partners is designed to provide support
not only for government’s attack on loan modification scams, but also to assist private enforcement efforts and to
help homeowners recognize, avoid and report individuals or companies selling fraudulent loan modification
services.
R OLE OF L EGAL V OLU NTEE RS
As noted above, one important component of the Loan Modification Scam Prevention Network is direct
homeowner contact. Homeowners who have reported scams (and are prioritized based on certain criteria) will be
contacted by trained legal volunteers who will conduct a more substantive intake to collect detailed information.
This information is critical in the fight against loan scammers as it will help identify how scammers operate, loop-
holes in current law and regulations, new geographical targets and possible litigation opportunities. These in-
depth intakes will be analyzed by Lawyers’ Committee staff and our on-the-ground legal teams, as well as shared
with appropriate law enforcement and regulatory agencies and other key partners in the fight against scammers.
Your role as a legal volunteer conducting these interviews is critical.
T HIS M ANUAL
This manual is designed to provide basic information about loan modification scams to the pro bono lawyers,
paralegals and law students who have volunteered to work on this project and to assist them as they contact
persons identified for calls from the database. It includes an overview of the following:
• Foreclosure crisis and resulting loan modification scams
• Loan Modification Scam Prevention Network
• Guide for volunteers working with homeowners
• Identifying and avoiding scams and resources/laws available
In addition, it is important to emphasize two important aspects of this program from the outset.
FIRST, the role of the pro bono legal volunteers is to gather additional detailed information about the loan scam
from the homeowner and provide basic information regarding resources. Volunteers will not provide advice nor
counsel homeowners on how to modify their troubled loans. However, almost all homeowners being contacted
will be in financial distress and in need of counseling. As a result, volunteers should encourage homeowners to
obtain free foreclosure counseling services and provide a list of resources to meet this need. In addition, it will be
helpful for the legal volunteers to have a basic understanding of the foreclosure process in the homeowner’s state
in order to conduct the best interview possible.
SECOND, pro bono legal volunteers will NOT establish an attorney-client relationship with the homeowner.
Rather, the primary purpose of the call is to gather detailed information from the homeowner about any loan
scam, which will be utilized by the Lawyers’ Committee, law enforcement, pro bono lawyers, and others to
determine appropriate enforcement actions.
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SECTION 2 – THE PROBLEM
T HE F ORECLOSURE C RISIS IN C ALIFORNIA
California has been hard hit by the foreclosure crisis. According to RealtyTrac, during the third quarter of 2009,
California posted the nation’s third highest state foreclosure rate, with one in every 53 housing units receiving a
foreclosure filing. In addition, of the metropolitan areas with the highest foreclosure activity in the third quarter, 6
of the top 10 were in California: Merced, Stockton, Modesto, Riverside/San Bernardino/Ontario, Bakersfield, and
Vallejo/Fairfield. In addition, the metropolitan areas of Sacramento/Arden/Arcade/Roseville, Fresno, Salinas,
Visalia/Porterville, San Diego/Carlsbad/San Marcos were in the top twenty.
National foreclosure statistics do not break out data by race or ethnicity. However, there is evidence that Hispanic
homeowners in California have been disproportionately impacted by the housing crisis because of the Hispanic
populations in areas where the housing bubble was pronounced, such as Central and Southern California. In fact,
according to the Census, almost all of the aforementioned metropolitan areas in California have majority-minority
populations where the largest minority group is Hispanic.
B RIEF O VERVIEW OF THE C ALIF ORNIA F ORECLOSURE P ROCESS
Non-Judicial Foreclosures
The primary method of foreclosure in California involves what is known as non-judicial foreclosure. Below are
some important points about the non-judicial foreclosure process.
• In California, a security interest in residential real property is evidenced by a deed of trust (rather than a
conventional mortgage).
• A non-judicial foreclosure does not involve court action. When a deed of trust is initially signed, it will
usually contain a power of sale clause, which, upon default of the loan, allows a trustee to sell the
property in a foreclosure sale in order to repay the underlying loan. If this clause is not included in the
loan documents, a non-judicial foreclosure will not be permitted.
• The trustee under the deed of trust carries out the sale of the property on behalf of the lender, usually in
the form of an auction of the property. In California, title companies primarily serve as trustees under
deeds of trust. Thus, title companies typically manage foreclosure sales in California.
• California follows the “one-action rule,” which means that once a foreclosure sale has been completed by
non-judicial means and the proceeds have been applied to the underlying loan, a second action to recover
any remaining amount owed under the loan (“deficiency judgment”) is not permitted. The effect of this
sale is that a lender is only entitled to the value of the property regardless of whether the property is
worth less than the amount of the loan.
You should be familiar with California’s Power of Sale process, described below.
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• The foreclosure process begins when a lender records a Notice of Default in the county in which the
property is located. The borrower has a three month “reinstatement period” after the recordation of a
Notice of Default to cure the default and stop the foreclosure process.
• The California Foreclosure Prevention Act (Cal. Civ. Code § 2924), which became effective March 16, 2009,
adds an additional 90-day foreclosure moratorium for certain loans unless a lender offers a
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comprehensive loan modification program designed to keep a borrower in his home. The Act applies to
the loan if: (1) the loan was recorded between January 1, 2003, and December 31, 2007; (2) the loan was
secured by a first deed of trust on the property; and (3) the borrower occupied the property as a principal
residence at the time the loan became delinquent.
• If the default has not been cured in time, a Notice of Sale may be recorded. The Notice of Sale must: (1)
be produced at least 20 days prior to the actual date of the sale; (2) say exactly when and where the sale
will take place, describe the property to be sold, say what the total debt is against the property and
provide an estimate of what the costs of foreclosure will be; (3) be posted at the property being
foreclosed upon and in a public place in the county where any sale would occur; and (4) be published in a
newspaper, once a week, for at least three weeks, starting at least twenty days prior to the sale.
• A foreclosure sale can be conducted upon expiration of the notice period. Foreclosure sales must take
place on a business day between the hours of 9 a.m. and 5 p.m. PST and must occur at the location
referenced on the Notice of Sale. The trustee will auction the property to the highest bidder (which
bidder may be the lender). The borrower may request a one-day postponement of the sale if he or she
can show that adequate financing is obtainable to prevent foreclosure of the home.
Judicial Foreclosures
California also provides for judicial foreclosures. A judicial foreclosure is different from a non-judicial
foreclosure because it: (1) involves the court system; (2) may permit a lender to recover a deficiency judgment
against the borrower; and (3) may permit the borrower a “right of redemption,” which is a period from 3
months to 1 year (depending upon the foreclosure sale price) where the borrower can reclaim the foreclosed
property by paying the foreclosure sale price plus interest. Because the judicial foreclosure process takes
longer than non-judicial foreclosure, it is rarely used, and usually occurs when no power of sale language is
included in the loan documents.
L OAN M ODIFICATI ON S CAMS
Why Is This A Problem?
Many of the individuals involved with putting homeowners into mortgages they could not afford are now
taking advantage of these same homeowners as they face foreclosure. Just as the foreclosure crisis itself has
overwhelmingly impacted minority homeowners, the victims of this second wave of scams are also largely
minority populations. The result is a civil rights crisis like nothing seen before.
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Lenders may avoid the moratorium if they present a comprehensive loan modification program based, in part, on criteria set forth
by the Federal Deposit Insurance Corporation, including interest rate reductions, extensions of the loan term, and principal
reductions.
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The scams themselves are usually heavily-promoted, especially in areas with high rates of foreclosures. They
often involve lofty promises to save distressed homeowners’ homes from foreclosure, even before the home
is actually in foreclosure. Some are very sophisticated, using documents that appear to come from a financial
institution or governmental agency, while others may simply use hand-drawn signs posted at freeway exits.
Instead of avoiding a foreclosure, the “rescuer” seeks to gain title or control over the property to drain the
property of its equity value, to own the property outright, or to take payments and fees without providing any
services. In the end, the homeowner is faced with eviction and continues to owe the lender the remainder of
the mortgage.
Common Types of Loan Scams
There are six main types of scams:
Phantom Help Foreclosure Counseling
This is the most common type of loan modification fraud. The homeowner is asked to pay a high fee for
help with modifying his or her mortgage or with delaying foreclosure. Once the fee has been paid, the
alleged rescuer does nothing or next to nothing to provide the help offered or advertised. Often, the help
promised by the rescuer could have been accessed by the homeowner elsewhere for free. By the time
the homeowner realizes that no help is forthcoming, he or she is left without assistance and with little or
no time to save the home.
Lease-Back or Repurchase Scams
The scheme consists of the homeowner surrendering his or her title to the property to the rescuer. In
exchange, the rescuer (who sometimes refers to himself as an “equity purchaser”) promises to pay the
mortgage, to allow the homeowner to rent the property, and to give the homeowner an opportunity to
repurchase the property after a period of time. However, the contract terms for the buy-back are usually
so onerous that actual buy-back is impossible. The transfer of the deed also allows the rescuer to evict
the former homeowner, raise the rent, sell the property, or drain the equity value from the property.
Scammers often perpetrate this fraud by use of a land trust, which is an agreement where one party (the
trustee) agrees to hold ownership of property for the benefit of another party. With a land trust, the
homeowner is still liable for the mortgage and the scammer’s name does not become public record. A
land trust also does not trigger the “lender due on sale” clause of the mortgage, which would require
payment of the mortgage at the time the property is sold to the scammer. The homeowner thus loses
possession of his or her property, is stripped of the property’s equity, and remains liable for the balance
of the mortgage.
Fraudulent Refinance
In these cases, homeowners are promised a new mortgage at a lower rate in order to refinance their
existing mortgage. When the new mortgage is supposed to be signed, the homeowners are told they are
signing new mortgage documents, when in reality they are signing the title of the property over to the
rescuer. In some cases, the homeowner even makes monthly payments to the rescuer until the scam is
revealed.
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Fraudulent Loan Modification
This scheme, which is becoming increasingly common, involves an alleged rescuer who pretends to help a
distressed borrower renegotiate their mortgage with their lender, only to redirect the payments to the
“rescuer” without the lender’s knowledge.
Bankruptcy Foreclosure
In this scheme, the alleged rescuer purports to negotiate a refinancing with the homeowner’s lender after
collecting an upfront fee from the homeowner. Instead of contacting the lender, however, the alleged
scammer pockets the fee and files a bankruptcy case in the homeowner’s name and without the
homeowner’s knowledge. The bankruptcy filing will stop a home foreclosure, but only temporarily.
Reverse Mortgage Fraud
In this scam, Home Equity Conversion Mortgages (HECMs) —or reverse mortgages— are exploited to
defraud senior citizens of the equity in their homes. Perpetrators typically identify foreclosed, distressed,
or abandoned properties using information contained within county deed records. Alleged rescuers
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purchase the properties using straw buyers who fraudulently claim to be using them as their primary
residences. The alleged rescuers then recruit a senior to “purchase” the property from the straw buyer,
typically through a deed transfer and no exchange of money. After the senior has lived in the home for at
least 60 days, the “rescuers”, with the aid of an inflated appraisal of the property, arrange for the senior
to obtain a reverse mortgage and encourage the senior to request a lump sum disbursement of the
property’s equity. The alleged rescuers then arrange for fictitious loans and liens that allow them to
distribute the loan proceeds to themselves, the straw buyer, or others at closing.
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A straw buyer is a person who purchases property for another to conceal the identity of the real purchaser.
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SECTION 3 – THE LOAN MODIFICATION SCAM PREVENTION NETWORK
O VERVIEW OF THE L OAN M ODIFIC ATI ON S CAM P RE VENTION N ETWORK
Response to the Crisis
As noted before, the Loan Modification Scam Prevention Network (LMSPN or Network) was created to
strengthen the fight against these scammers and support existing efforts at the national, state and local
levels. The Lawyers' Committee is creating tools and to enhance and support existing state and local efforts,
increase scam reporting, educate homeowners, and work with law enforcement. This comprehensive
campaign includes:
• Simplified Reporting Mechanism - Increasing the number of complaints submitted by homeowners is
a top priority of the Network. Complaints against alleged scammers can be submitted via a simple
online form (available in hard copy) by homeowners anytime, housing counselors and advocates
working with homeowners, at foreclosure prevention events, and through the Homeowners' HOPE
Hotline (1-888-995-HOPE).
• Creation of National Database - A national database (National Loan Modification Scam Database or
Database) has been created to house these complaints, which supports federal, state and local law
enforcement efforts and provides a comprehensive picture of the loan modification scam crisis
nationwide. It is anticipated that as a result of the national Loan Modification Scam Database,
enforcement activities will increase at the state and local level not only by prosecutors, but also state
regulatory agencies.
• Support of State and Local Efforts - The Network supports ongoing state and local law enforcement
efforts by sharing complaint information, providing access to national data to determine whether
alleged scammers are operating across jurisdictions and state lines, working with active coalitions,
educating the public and homeowners, and supporting commonsense legal and policy reforms.
• Direct Homeowner Contact - Trained volunteers will contact homeowners who have reported scams
to conduct a more substantive intake to collect detailed information about scammers and how they
operate and transmit this information to appropriate law enforcement agencies.
• Public Education - A strategic public education effort is underway, utilizing both online
(www.preventloanscams.org) and offline tools, to use the information in the Database and the
experience of leaders on the ground to help homeowners identify and avoid scams and paint the
clearest picture of the havoc wrought by loan modification scammers.
Simplified Reporting Mechanism
Critical to shutting down scammers is increasing the number of complaints that law enforcement
receives. The Network has created an effective, yet simple means to do so. First, homeowners are able
to report complaints against alleged loan modification scammers themselves via a short public form on
the Network's website, or by calling the Homeowners' HOPE Hotline (1-888-995-HOPE). Second, housing
counselors and lawyers assisting homeowners in modifying their loans can report complaints via the
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online form (or paper version). Counselors at foreclosure prevention events across the country are also
filing online complaints on behalf of homeowners.
Creation of National Database
A National Loan Modification Scam Database (Database) has been created by the Network to house these
complaints. Sophisticated and user-friendly, this national web Database is building a comprehensive
record of loan modification scams for use in private enforcement and public education campaigns by local
and national partners.
This new Database is vital for several reasons. For one, unlike federal, state and local governmental
agencies, which cannot share complaint data with non-profit organizations, this Database is available to
our partners, both public and private, thereby increasing the possibility of private enforcement actions.
(All complaints, pending homeowner approval, are automatically sent to the Federal Trade Commission's
Sentinel Database, which is available to federal, state and local law enforcement agencies.) In addition,
because scammers operate across state and county lines, collecting complaints in a national database,
instead of being captured in silos by jurisdiction, allows the Network and its partners to better analyze
trends and get a broader picture of the activities by scammers. The number of complaints filed will
increase across the nation due to a simplified intake questionnaire available for HUD certified counselors,
hotlines, legal aid lawyers and organizations holding clinics. Instead of only referring homeowners to
other sources, complaints are filed on-site, reducing the chance of homeowners not following through on
their own. Finally, we will save valuable resources at the state and local level by having this database
available for use at no cost.
Support of State and Local Efforts
The primary objective of this effort is to bring additional resources to bear in support of existing
foreclosure prevention and loan scam programs at the state and local level, including empowering them
with current information. Providing local programs with an effective referral capacity is critical to a
coordinated national crack down on loan modification scammers because they easily operate across state
lines, shut down quickly when under pressure, and reopen at another address or in another
jurisdiction. The Network is working to increase scam reporting, analyze complaints reports collected in
the Database, spearhead local public education efforts, push for strong anti-scamming policies and rules,
support governmental enforcement, and bring private enforcement actions when necessary. This
coordinated work at the state and local level will make it more difficult for scammers to continue to
operate. Indeed, it is strongly anticipated that there will be increased enforcement actions against
scammers through both private and government efforts.
Direct Homeowner Contact
Using the Network's Database, the Lawyers' Committee is identifying homeowners (prioritized by
location, type of scam, and other factors) to be contacted by trained legal volunteers to gather additional
vital information about the nature of, and documents related to, their situation. This direct contact with
homeowners allows the Network to collect even further detailed information about how scammers
operate to aid analysis and enforcement efforts. All homeowners receive information via the Network's
eSupport system. Through this system, the Network sends emails to homeowners with local information
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on how to avoid a scam, news on enforcement actions against scam individuals and companies, and local
resources available to help them fight scams and receive assistance in modifying their mortgages.
Public Education
Homeowners who are not fully educated about this issue are more likely to fall prey to scam activities. To
that end, building on the loanscamalert.org outreach campaign the Network is coordinating a strategic
earned media campaign and using the www.preventloanscams.org website to use information collected
through the Database and experiences of local leadership to educate the public. The media campaign and
website publicizes resources available to homeowners and information on filing a complaint report,
common tactics used by scammers, tips on how to avoid a scam, news on enforcement actions against
individuals and companies involved in scam activities, and other updates on the Network’s activities.
T HE N ATIONAL L OAN M ODIFICATION S C AM D ATABAS E
About the National Loan Modification Scam Database
The Network created the national Loan Modification Scam Database to house large numbers of complaints to
enable easy analysis of the scam crisis nationwide, while better assisting federal, state, and local law
enforcement efforts. In addition, civil rights, non-profit housing organizations, legal aid groups, and consumer
protection organizations also have access to complaint information, which further supports governmental
efforts.
The National Loan Modification Scam Database:
• Automatically sends complaints (provided homeowner permission) to the Federal Trade
Commission's Consumer Sentinel Database, which is available to federal, state and local law
enforcement;
• Allows the Network to compile and forward specific scam information to state and local enforcement
officials directly;
• Provides the Network the ability to easily search and sort data to analyze national trends and increase
the ability of law enforcement to prosecute scammers;
• Allows partners (including non-profit housing, legal aid, consumer protection, and civil rights
organizations) involved in the fight against scammers, but who cannot access complaints filed with
government agencies, to review scam data;
• Enables trained Network volunteers to call homeowners to collect even more detailed information
about their situation to improve data analysis and enforcement efforts; and
• Provides a general overview for the public, media and policymakers via the
www.preventloanscams.org website.
Initial Complaint Report Sources
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Initial complaint reports will come from three main sources – data-sharing partnerships, such as the Network’s
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partnership with the Homeowners’ HOPE Hotline (1-888-995-HOPE) ; online basic form submissions processed
through the Network’s website and linked to from multiple partner websites; and paper basic form
submissions returned to and processed by the Network.
Homeowners’ HOPE Hotline (1-888-995-HOPE)
The largest single source of complaint reports to the Database is from the Homeowners’ HOPE Hotline
(Hotline), which is a primary provider of free HUD certified counseling assistance in association with the
federal Making Home Affordable program. Homeowners who call the Hotline and identify themselves as
being scammed (or potentially scammed) are referred to an escalation team of counselors who gather
basic information on the homeowner and the possible scam. (This is the same information obtained from
our other sources. See below.) These complaints are electronically transferred to the Database on a
weekly basis. The Hotline is operated by the Homeownership Preservation Foundation, which is a non-
profit organization funded by servicers/lenders, Fannie Mae, the U.S. Department of Housing and Urban
Development, and the National Foreclosure Mitigation Counseling Program.
Online basic form submission
The Network has created a basic complaint form which is similar to the set of questions hotline partners
are using. The online version of this complaint form is located at http://complaint.preventloanscams.org.
Partners are linking directly to this form from their websites. This form is available in English, Spanish,
Chinese, Korean and Vietnamese.
To avoid duplication, every person who visits the online form will be asked to submit their email address.
If the email address has already been used to submit a claim, the person will be informed that a complaint
was already submitted on X date, and will be asked if they would like to submit a new claim about a
different incident. Visitors will be able to submit multiple complaints using a single email address if
necessary.
When submitted, these complaint reports will immediately become a part of the Database.
Paper basic form submission
The Network has also created a paper version of the basic complaint form for use by partners and
specifically for use at mortgage fairs and other venues without internet access. This form is available in
English, Spanish, Chinese, Korean and Vietnamese. The paper form is included in this manual’s
appendices. Paper forms may be distributed to homeowners to fill out themselves, or on behalf of
homeowners by volunteers.
Completed forms can be submitted as follows:
• Scanned and emailed to info@preventloanscams.org
• Faxed to 202-783-0857 (ATTN: LMSPN Complaint)
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The Hotline is administered by the Homeownership Preservation Foundation. It is a primary source of free HUD certified counseling for the
federal Making Home Affordable program.
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• Mailed to:
Loan Modification Scam Prevention Network—Complaint
Lawyers’ Committee for Civil Rights Under Law
1401 New York Ave NW, Suite 400
Washington, DC 20005
Once submitted to the Network, these paper forms are manually entered into the database.
Other Partners
Other hotline partners may include a basic set of pertinent questions to their scripts, effectively screening
each caller for signs of a potential loan modification scam, including the payment of advance fees,
guarantees of modifications, and other red flag situations.
These complaint reports, including homeowner contact information and the responses to the screening
questions, will be transferred to the Network via an electronic spreadsheet on an agreed upon schedule.
The Network will then upload these complaints into the Database. This upload process will include a de-
duplication feature, helping to ensure that there is only one record per homeowner complaint.
E-Support and Supplemental Online Complaints
Once a complaint is submitted to the Database, an automatic email to homeowners will be generated within
one week of submission. This e-Support will confirm the complaint submission, provide state- and language-
specific information about resources, include general tips for recognizing and avoiding scams, and will provide
a link to a more extensive online form (the Supplemental Online Complaint), which will allow homeowners or
their representatives to submit a more complete record.
To avoid duplication, when a person visits the Supplemental Online Complaint form, he or she will be
prompted to enter their email address before filling out the form. If the email address is already associated
with another record in the Database, the person will be prompted to either confirm that they have already
submitted a complaint (in which case they will not proceed with the form), or to confirm that they are
submitting a different complaint.
The supplemental form will be pre-populated with the information initially submitted, so the person may
update information if necessary. This also prevents visitor fatigue by reducing the number of questions that
must be answered.
The Federal Trade Commission
All persons who submit a complaint to the Database will be asked for permission to share their information
with the Federal Trade Commission (FTC) and other enforcement agencies. For all complaints for which
permission is given, the data will be shared automatically with the FTC and their Sentinel Database, which is
accessible by federal, state and local enforcement agencies.
Also, through the Network’s outreach with state and local partners and governments we may arrange
separate data-sharing agreements. Again, only those reports with express sharing permission will be included
in any data exchange.
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Enforcement Agencies and Non-Profit Partners Have Access
All partners of the Network will have access to the complaints via the web-based secure National Loan
Modification Scam Database. Federal, state and local enforcement and regulatory agencies will have access to
all information in the complaints, while non-governmental non-profit partners will have access to all
information except personally identifiable information of the homeowners. Non-governmental organizations
will first need to sign a Memorandum of Understanding outlining the terms and conditions of access to the
Database, including the prohibition of distributing the names of any alleged scammers unless to law
enforcement agencies or otherwise publically identified as an alleged loan scammer.
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SECTION 4 – GUIDE FOR VOLUNTEERS WORKING WITH HOMEOWNERS
As noted before, one of the critical elements of the Loan Modification Scam Prevention Network is direct
homeowner contact. As a volunteer for this effort, you will work with identified homeowners to gather additional
information about the alleged loan modification scam to further aid enforcement efforts. This section provides the
background you will need, including general information on volunteering, how you will be assigned homeowners
with which to work, and how to conduct the interviews. This last section is important in that it outlines: the role of
the legal volunteer; online intake questionnaire; tips for successful interactions with homeowners; obtaining
homeowner documents; tracking progress and closing a matter; and volunteer support.
V OLUNTEERING
The Role of the Legal Volunteer
The main goals of a legal volunteer are to: (1) gather detailed loan modification scam information from
homeowners using an in-depth questionnaire (found in each homeowner’s record); and (2) provide
homeowners general information regarding loan modification scams. Since borrowers who face foreclosure
are often stressed, frustrated, and stretched thin, the legal volunteer should anticipate emotional interactions
with some homeowners. It is important for the legal volunteer to remain calm at all times.
In addition, the legal volunteer will not assist homeowners with mitigating foreclosures or foreclosure
prevention. The volunteer only helps the homeowners report details regarding their alleged foreclosure
rescue scam experiences. If homeowners have questions related to their mortgage, the volunteer should tell
them to contact their housing counselors and/or lender. If homeowners are not working with a HUD-certified
counselor, then the volunteer should direct them to the Network’s website (www.preventloanscams.org)
where they can find HUD-certified counselors in their area.
It is also important for legal volunteers to tell homeowners that they DO NOT legally represent the
homeowners whom they interview. Therefore, there is no privilege or confidentiality protecting the
communications between the volunteers and the homeowners. In addition, volunteers licensed to practice
law should not attempt to create an attorney-client relationship by providing legal advice as to how
homeowners should handle their alleged scam experience. At most, the volunteer can report the facts to the
borrowers, such as refer homeowners to attorneys who can provide such legal advice and state the federal
and state laws on a given issue.
Overall Process
The overall process of volunteering for the Loan Modification Scam Prevention Network to contact
homeowners and conduct a thorough review and analysis of any alleged loan scam includes the following:
1. Someone signs-up online to:
a. Volunteer
b. Identify the number of homeowners they are willing to contact
c. Attend a training
2. Volunteer participates in a training.
3. A login and password to the online Database are sent to the volunteer.
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4. Volunteer logs in and views the homeowners assigned to him/her and runs a conflict check on each
homeowner.
5. Based on the conflict checks, the volunteer “accepts” or “rejects” each homeowner via the Database.
6. For those homeowners accepted, the volunteer can now see the information gathered to-date from
each homeowner.
7. Volunteer contacts each homeowner and commences in-depth interviews based on online interview
questions (found in each homeowners record, which can be completed online by “editing” the
record), including gathering documents as needed.
8. As appropriate, the volunteer will note the progress (or lack of) in contacting homeowners.
9. Volunteers will close out each homeowner’s record upon completion of interview.
10. For each homeowner who is unreachable or unwilling to be interviewed, the volunteer will note that
and a new homeowner will automatically appear in the volunteer’s queue.
11. After completing the interviews of the agreed upon number of homeowners, the volunteer will notify
the Lawyers’ Committee.
A SSIGNING H OME OWNERS AND R ECEIVING T HEIR I NF ORMATI ON
All homeowners when they submit a complaint through the Homeowners’ HOPE Hotline, online complaint form or
paper version are asked if they are willing to be contacted by a Lawyers’ Committee volunteer to learn more about
their alleged scam. Only consenting homeowners have their complaints placed into the pool for possible follow-up
by a volunteer. Eligible homeowner complaint reports are then reviewed based on a series of administrator-set
priorities that may include, but are not limited to:
• Location
• If the homeowner paid money, and how much
• Date submitted
• If the homeowner has documentation
Homeowners are then assigned to volunteers. To learn which homeowners you have been assigned:
1. Login to the Database at http://partnerlogin.preventloanscams.org.
2. using your login and password you received after training.
3. On the left side of the screen you will see the bar “Manage Complaints”.
4. Click on “My Potential Complaints.”
5. Your assigned homeowners will be listed in the “My Potential Complaints.”
6. Based on the name and address for each homeowner, run a conflict check for all.
7. Once the conflict check is complete, “accept” or “decline” each homeowner.
8. The “accepted” homeowners will now show up in your “My Assigned Complaints.”
C ONDUCTING I NTERVIEWS OF H OME OWNE RS
Working with Homeowners
First and foremost, it is critical that you manage the expectations of the homeowners from the beginning.
When speaking with a homeowner for the first time, it is important to make clear that you CANNOT legally
represent them in any capacity, nor are you able to assist them with a loan modification or as part of any
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foreclosure processing. Your role is to gather as much information as possible to assist enforcement efforts
against loan scammers. However, you can direct homeowners to legal aid and housing counseling resources
in their area. (See “Potential Questions and Answers” below.)
Second, it is very important to remember that most homeowners are in crisis and may be under extreme
stress. Many may be on the verge of losing their homes to foreclosure and are more concerned with obtaining
a modification to their mortgage (as they should be.) As a volunteer, please be courteous, understanding and
patient with your homeowners. We have found many want to tell their stories about being scammed, and
they need your empathy. In addition, most often, when made clear you cannot represent them individually,
homeowners are willing to share their information to help prevent other homeowners from becoming victims.
Conducting the Actual Interview
To be consistent with the type of information gathered from homeowners, while being as user-friendly as
possible, an in-depth questionnaire has been developed for volunteers. This questionnaire is
incorporated into each homeowner’s record and can be completed online in the Database (found at
http://partnerlogin.preventloanscams.org.) While each homeowner contacted will have previously
provided basic information regarding the alleged scam (which is pre-populated in each homeowner’s
record), additional information is needed to assist enforcement efforts, including: additional information
about the homeowner, alleged scam company, alleged scam details, home information, as well as
gathering any relevant documents if appropriate.
A hard copy of the questionnaire is available in the appendix for your review generally. It is important to
become familiar with the questions in advance of calling any homeowner. However, when logged into a
specific homeowner’s record, you may view the questions and provide the homeowner’s responses in the
following categories (Tabs on the Database):
• Homeowner Info
• Alleged Scam Company
• Alleged Scam Details
• Additional Scam Info
• Home and Mortgage Info
• Privacy and Action Taken
• Documentation
• Contact Log
• Notes
Information in each of these sections may be added or amended by clicking on the “edit” button on the
screen for each “tab.” As you talk with a homeowner, work through each category with the homeowner,
recognizing that flexibility on your part may be required and it is not necessary that each question be
asked and answered. You will need to gauge the homeowner’s comfort level, time, and general
willingness to speak with you. This is not a black and white process.
Tips for Successful Interactions with Homeowners
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The following includes basic advice on working with homeowners, including a sample script for initial
outreach, frequently asked questions and answers, as well as general Do’s and Don’ts. As the program grows,
we expect to receive additional “tips” from volunteers and we will post those on the Volunteer Toolbox
website at http://www.preventloanscams.org/pages?id=0010.
Script for Initial Call to Homeowner
Most likely, volunteers will need to make multiple contact attempts before reaching a homeowner and/or
finding a time that works best for the homeowner to talk. The below scenarios are available to assist the
volunteer with these initial calls.
i. Scenario 1: Someone answers the phone
Volunteer: Hello, my name is > and I am calling on behalf of the
Loan Modification Scam Prevention Network. Is > available?
Scenario 1: HO is not home
HO1: No. S/he is not here.
V: Ok. No problem. > filed a complaint with us regarding an
alleged loan modification scam that s/he experienced, and I wanted to follow up with him/her
I can call back later. Can you tell me when s/he will be available?
HO1: States a time.
V: Great. I will call back then.
(Document the date and time of your call and note when we should call back.)
Scenario 2: HO is home
HO2: This is >. (Continue with script below).
Volunteer: I am calling to follow up on a complaint that you filed with us regarding an
alleged loan modification rescue scam you experienced.
Scenario 1: HO is confused and/or does not remember filing a complaint to the Network.
HO1: What? I don’t know what you’re talking about.
V: I have in my record that you filed a complaint with us on X date. You reported the
incident using the >.
HO1: Oh, yes. I remember.
V: Great. (Continue with script below.)
Scenario 2: HO recalls submitting a complaint.
HO2: Ok. (Continue with script below)
Volunteer: I would like to ask you a few additional questions. All of the information you
provide will be extremely helpful for law enforcement agencies as they investigate your
case. Also, you should feel free to ask me any questions at the end.
Scenario 1: It is not convenient for the HO to talk now.
HO1: No, I’m very busy right now and can’t talk.
V: That’s alright. May I schedule another time to speak with you?
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HO1: Sure. (Schedule a time.)
Scenario 2: For whatever reason, HO does not want to answer more questions.
HO2: I don’t want to answer any more questions.
V: May I ask why?
HO2: Provides reason.
V: I understand. Providing more information to us would help law enforcement agencies
investigate and possibly stop the alleged scammer you reported.
HO2: No, I don’t want to.
V: Ok, well, thank you for your time. If you have questions, you can contact us and visit
our website (www.preventloanscams.org) for up-to-date information and resources in your
area.
Scenario 3: HO agrees to answer more questions.
HO2: Sure. (Continue with script below)
Volunteer: Great. Before we begin, I’d like to tell you a few things.
1. As a legal volunteer for the Network, I am only helping you with the alleged scam
experience, not anything else – I don’t provide any foreclosure counseling about
modifying or refinancing mortgages.
2. Also, I am not entering into any kind of privileged or confidential relationship with
any of the homeowners I work with. Therefore, you are not my client and
everything that you tell me is neither privileged nor confidential.
3. However, we will be sharing information gathered with law enforcement officials
to increase prosecution and enforcement against alleged loan scammers. As part
of that, we will share personally identifying information, such as your name,
address, and phone number, with the law enforcement agencies. No other third
parties will have access to that information.
4. And, of course, if you are uncomfortable with answering any questions, you can
simply tell me so and I can skip them.
5. Do you have any questions?
HO 1: Yes. (See Q and A potential scenarios below.)
HO2: No. (Continue with script below.)
Volunteer: Great. Let’s get started. (Use volunteer intake form.)
ii. Scenario 2: No one answers – voicemail
Volunteer: Hello, this is a message for >. My name is > and I am calling from the Loan Modification Scam Prevention Network, a
coalition led by Fannie Mae, Freddie Mac, NeighborWorks and the Lawyers’ Committee for
Civil Rights Under Law. (You can visit our website at www.preventloanscams.org for more
information.) I’d like to follow up with you about the complaint you submitted regarding an
alleged scam. When you have time, please give us a call back at: >. Thank you.
Potential Questions and Answers
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Basic Summary of the LMSPN
Q: What is the Loan Modification Scam Prevention Network?
A: The Network is a national campaign headed by Fannie Mae, Freddie Mac, the Lawyers'
Committee for Civil Rights Under Law and NeighborWorks to combat loan modification rescue scams.
The U.S. Treasury Department, the U.S. Department of Housing and Urban Development, the Federal
Trade Commission, the U.S. Department of Justice and the federal Making Home Affordable program
are all partners in this effort. The campaign’s goals are to educate homeowners about these scams as
well as boost national, state, and local enforcement efforts against these scammers by facilitating
data collection from homeowners who believe they have been scammed.
Relationship between LMSPN and Homeowner’s Loan Modification
Q: How is this Network related to what I am doing with my housing counselor?
A: While the Network does not address foreclosure or loan modification, we do work closely with
agencies and housing counselors who are working with homeowners on saving their homes. Many
are gathering complaints against alleged scammers for the Network and sharing that information
with us.
Help with Loan Modification
Q: Can you help me with my loan modification or mortgage refinancing?
(and any similar questions related to mitigating foreclosures or foreclosure prevention)
A: (If the question concerns non-legal foreclosure mitigation) Unfortunately, we do not work on any
issues related to preventing foreclosures. A free HUD-certified housing counselor can help you with
that. If you do not have one, I can refer you to our website (www.preventloanscams.org) where you
can find a free HUD-certified counselor who can assist you in your area or call 1-888-995-HELP for
assistance.
A: (If the question concerns foreclosure mitigation involving the law) Unfortunately, we do not work
on any issues related to preventing foreclosures. Our website (www.preventloanscams.org) has links
to legal aid organizations, which have attorneys that may be able to answer your legal questions.
Please keep in mind that many of these organizations have limited resources and can only take on so
many clients. In addition, many have income-eligibility requirements for purposes of representation.
If you do not have internet access, I can do a quick search for you.
Directions for volunteer:
• Go to www.preventloanscams.org.
• Click on the appropriate state.
• Click on “Help for Distressed Homeowners.”
• Based on the homeowner’s location, determine which legal aid organization is closest,
or let the homeowner decide. (NB: For some states, there will be few legal aid
organizations in the state. In that case, you may have to give the HO whatever contact
information is available.)
Help with Other Types of Real Estate Fraud
Q: What do I do if I think I have been a victim of predatory lending, a fraudulent appraisal, etc.?
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A: Unfortunately, we only provide resources directed at loan modification scams. There are local
agencies, legal aid, and consumer rights organizations working on that issue in your state or locality.
Please visit our website (www.preventloanscams.org) and click on your state for more information.
Concerns about Privacy, Privilege, and Confidentiality
Q: I am concerned about releasing my private information to you since it will not be privileged or
confidential.
A: Any identifying information you provide, such as name, address, phone number, email, and
mortgage details, are only available to law enforcement agencies as part of their investigations. This
information will not be shared with other parties.
Q: What happens to the information I give you?
A: The information will be housed in our database and forwarded to the Federal Trade Commission
and governmental enforcement agencies. Also, some non-identifying information will be available to
the public and our partners on a limited basis.
Managing Homeowners’ Expectations
Q: What happens now?
A: Your information, with your permission, will be forwarded to law enforcement officials. While
you will not hear from them directly, this complaint and others like it are being used to prosecute and
enforce laws against alleged scammers.
Q: Can I get my money back from the alleged scammer?
A: It is often difficult, if not impossible, for homeowners to get back the money paid to these
alleged scammers. Often times, the scammers elude authorities by quickly closing and reopening
their businesses elsewhere. There are sometimes, however, some self-help options like small claims
court.
If you would like a legal assessment of your case, I’d recommend that you contact the legal aid
organization in your area, which you can find at www.preventloanscams.org on the State Page under
“Help for Distressed Homeowners.” Please keep in mind that many of these organizations have
limited resources and can only take on so many clients. In addition, many have income-eligibility
requirements for purposes of representation.
Q: How will reporting my experience with an alleged scammer help me?
A: The information you provide to the Network will boost enforcement efforts to help stop scams in
your area.
Homeowner Becomes Emotional about Scam Experience
A: I am sorry Mr./Ms. > about your experience. I know that it must be
difficult to discuss the details. But I appreciate all the information you are providing us. This will be
very helpful for the enforcement officials.
Legal Advice about How to Proceed
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Q: What do you think I should do legally? Can I sue the alleged scammer?
A: I cannot give you any legal advice about how you should proceed. A legal aid organization in
your area might be able to help. However, please know they have limited resources and are only able
to take on so many clients. In addition, many have strict income-eligibility requirements.
(If HO has internet access.) Please feel free to go to our website and click on the state page to get a
list of legal service providers under “Help for Distressed Homeowners.”
(If HO does not have internet access.) I can do a quick search for you on our website. Please give me
a few minutes.
Directions for volunteer:
• Go to www.preventloanscams.org.
• Click on the appropriate state.
• Click on “Help for Distressed Homeowners.”
• Based on the homeowner’s location, determine which legal aid organization is closest,
or let the homeowner decide. (NB: For some states, there will be few legal aid
organizations in the state. In that case, you may have to give the HO whatever contact
information is available.)
Information about Alleged Scammers
Q: How can I get more information about alleged loan modification scam outfits in my area?
A: Our website (www.preventloanscams.org) is always a resource for people who want more
national and local materials about these scams. It does have state-specific lists of individuals and
companies publically identified as alleged scammers, for some but not all states.
Getting HUD-Certified Counseling
Q: Do you need information as to how to obtain free HUD-certified counseling in your area?
A: Do you have internet access?
(If yes.) Please feel free to go to our website and click on “Get Free Counseling” link on the main
page. That will link you to various sources where you can find free HUD counseling that is
located closest to you. You can also call 1-888-995-HOPE to access a counselor over the phone.
(If no.) You can call 1-888-995-HOPE to access a counselor over the phone. Or I can do a quick
search for you.
Directions for volunteer:
• Go to: http://www.hud.gov/offices/hsg/sfh/hcc/fc/
• Click on the appropriate state.
• In the field boxes, type in the city and state. If there is a language requirement, pick the
language from the drop-down box.
Do’s and Don’ts of Working with Homeowners
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DO
• Tell homeowners you are a volunteer with a non-profit organization working with law enforcement.
• Be courteous, calm, and patient with homeowners.
• Tell homeowners you appreciate them taking the time to speak with you.
• Allow homeowners to interrupt you with questions during the intake.
• Let homeowners know you are not able to represent them against an alleged scammer or with their
loan modification or foreclosure proceedings.
• Tell homeowners any information is very helpful to law enforcement officials in prosecuting alleged
scammers.
• Manage homeowners’ expectations about what will happen after filing complaints.
o Their information will be shared with prosecutors in their state and with federal agencies in
the fight against loan scams.
• Refer homeowners to our website for additional resources and information
(www.preventloanscams.org).
• Encourage homeowners to work with a FREE HUD-certified housing counselor if they are not already
doing so with any loan modification needs (call 1-888-995-HOPE or visit www.preventloanscams.org).
DON’T
• Promise to keep any information privileged or confidential. (Note that personally identifying
information will only be released to government enforcement agencies.)
• Provide legal advice to homeowners on any matter.
• Give any advice regarding foreclosures or the homeowners’ mortgages.
• Comment about other types of real estate fraud, other than loan modification scams. (Refer
homeowners to our website for more resources.)
Obtaining Homeowner Documents
While working with homeowners, it may be necessary to obtain copies of relevant documents. When dealing
with documents, please follow the instructions below detailing required redaction, saving protocols and how
to transmit such documents to the Loan Modification Scam Prevention Network.
Note: Volunteers should only receive COPIES of documents. If a homeowner sends originals materials,
volunteers must contact the homeowner and inform him or her that the volunteer will make copies,
with the homeowner’s permission, and return the originals. No volunteer may retain original
homeowner documents.
Redacting
Since documents are likely to contain sensitive information, and since the volunteers will NOT enter into
attorney-client relationships with homeowners, redaction will be necessary on the part of the
homeowner. A homeowner may send copies of documents to the volunteer in any agreed upon format.
The volunteer must instruct the homeowner to black out the following types of information:
• Social Security Numbers,
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• Credit Card Numbers,
• Bank Account Information,
• Loan Numbers, and
• Any other sensitive information.
If a volunteer receives documentation without any of the above fields blacked out, s/he should personally
black out the fields.
Saving Documents
Homeowner documents should be saved by the volunteer in a secure manner, following all legal
guidelines. The homeowner must be informed that the volunteer is saving the materials.
Recording Document in Database
Any homeowner document received by a volunteer must be noted in the Database. To record that a
document has been received, click on “Documentation” in the Case Details screen of the database. Enter
the following information in the window that appears:
Title: Enter a descriptive title of the document that does not include any
personal/identifying information (specifically do not include the homeowner’s
name).
Type: Select the type of document from the drop-down menu. If there is not a
relevant type, select “other” and enter the type of document in the available
space.
Submitted by: Enter the name of the person who submitted the document (usually the
homeowner’s name).
Date Received: Enter the date the document was received.
Received by: Enter the name of the person who received the document (usually the
volunteer’s name).
Description: Enter a brief description of the contents of the document.
Location: Enter three pieces of information here:
• Where the volunteer has saved the originally received version of the
document.
• Whether the homeowner currently has the original document.
• The name of the document according to the following formula:
CaseCode_DateReceived_DocumentTitle
Example:
• Case code 307K39M16J44
• Document “Flyer from Potential Scammer”
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• Received by the volunteer on January 5, 2010
• Document name would be:
307K39M16J44_010510_Flyerfrompotentailscammer
Sending Document to the Loan Modification Scam Prevention Network
Any documents received by volunteers should be sent to the Loan Modification Scam Prevention Network
on the day it is processed, following the protocol below:
• If the document is electronic, save a copy using the “CaseCode_DateReceived_DocumentTitle” name
explained above.
• If the document is hard copy, scan and save a copy using the
“CaseCode_DateReceived_DocumentTitle” name explained above.
• Email the document to: securedocuments@preventloanscams.org noting the homeowner name and
Database matter number in the subject line of the email.
It is critical that the naming protocol is followed AND saved in the database.
Tracking Progress and Closing a Matter
Logging Calls and Progress
Volunteers are able to track calls to homeowners in each homeowner’s record in the Database. It is very
important to keep this up-to-date and note every effort to reach a homeowner, including even when
successful. When logged into the record of a particular homeowner, click on the Tab “Contact Log” and
enter the information each time reach out to the homeowner. The options include:
• Voicemail
• No Answer
• Other
The date and time will automatically be entered when the attempted contact was logged into the
homeowner’s record. If appropriate, please include information in the “Notes” section. Doing so will
allow you and the Lawyers’ Committee to easily track your progress with connecting with a homeowner.
(You do not need to enter this information when you successfully speak with a homeowner to conduct
the interview.)
Homeowner Unreachable or Unwilling to be Interviewed
If after repeated contact attempts the homeowner is unreachable or you speak with the homeowner and
they decline to be interviewed, it may be appropriate to close the homeowner’s record. (Generally, a
volunteer should attempt to contact a homeowner approximately 5 times. However, a volunteer does not
have to leave a voicemail 5 different times.) Please do so by clicking on the “Homeowner
Decline/Unreachable” button at the top right hand corner of the homeowner’s record.
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Please note, for each homeowner that is noted as “unreachable” or “unwilling to be interviewed”, the
volunteer will automatically be assigned another homeowner to interview in place of that homeowner.
Homeowner Interview Completed
Upon completion of the interview and the record is complete to the best of your knowledge/comfort
level, please note so by clicking on the “Complete” button at the top right hand corner of the
homeowner’s record.
Closing Out Pro Bono Involvement
Once you have completed the agreed upon number of homeowner interviews, please email the Lawyers’
Committee to notify us. If you do not want any more homeowners, we will then close-out your records
and your login/password to the Database. The contact is:
• Charlene Carruthers, at 202-662-8600 or ccarruthers@lawyerscommittee.org.
Volunteer Support
Substantive/Working with a Homeowner
Questions may arise while you are working with your homeowners. The Lawyers’ Committee will support
you in several ways. They include:
• Please visit the Volunteer Toolbox website at http://www.preventloanscams.org/pages?id=0010
to look for any postings on a particular topic from Lawyers’ Committee staff and/or other
volunteers; and
• Contact the Lawyers’ Committee “on-call” Staff Attorney with questions (visit the Volunteer
Toolbox website at http://www.preventloanscams.org/pages?id=0010 for directions on who to
contact and their email address and phone).
Administrative
If you have any administrative type questions (example – having problems with the login, Database,
would like additional homeowners assigned to you, etc.), please contact:
• Charlene Carruthers, at 202-662-8600 or ccarruthers@lawyerscommittee.org.
Confidentiality of Homeowner and Alleged Scammer Information in Database
All homeowner information, including their name, contact information, etc., is confidential and should not be
shared outside of your interaction with the homeowner, the Database, the Lawyers’ Committee and/or other
volunteers identified as supporting this effort.
Also, it is critical to remember that the Lawyers’ Committee, the Network, volunteers, and any of our partners
are NOT permitted to share publically the names and contact information of alleged scammers listed in the
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Database. This includes in publications, on websites, or even with homeowners. This is particularly relevant
to volunteers who may be asked by a homeowner whether the company they worked with have been
identified by others as potential scammers. You may, however, refer homeowners to a list of otherwise
publically identified scammers on the website at www.preventloanscams.org.
Volunteers agree to the following terms and conditions for access to the national Loan Modification Scam
Database (as part of this pro bono project):
• Alleged Scammer Information. Users shall not, either directly or through agents or volunteers,
distribute, make public, or share with any other parties, outside of entering the information into the
Database, the user’s supervisor for this pro bono matter, and the Lawyers’ Committee for Civil Rights
Under Law, the names of any alleged scam companies or individuals, including lawyers.
• Personally Identifiable Information of Homeowners. Users shall not, either directly or through agents
or volunteers, distribute, make public, or share with any other parties, outside of entering the
information into the Database, the user’s supervisor for this pro bono matter, and the Lawyers’
Committee for Civil Rights Under Law, the personally identifying information of any homeowner.
• Allegations of Wrongdoings. Information appearing in the Database or the Prevent Loan Scams
Website may consist of allegations of wrongdoing against an actor(s) and/or an entity(ies). The
Lawyers’ Committee for Civil Rights Under Law, its partners and/or other associated individual(s) do
not make these allegations nor do they confirm the legitimacy of the allegations which may appear
here, nor shall any allegation appearing here imply directly or indirectly any wrongdoing or guilt.
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SECTION 5 – IDENTIFYING AND AVOIDING SCAMS AND AVAILABLE SUPPORT SERVICES
FOR VICTIMS
I DENTIFYING S C AMS
Signs that a Company is Engaged in a Loan Modification Scam
While there are legitimate providers of loan modification assistance, there are just as many, if not more,
illegitimate scammers trying to take advantage of a vulnerable population. Below is a checklist of some “red
flags” that should alert you a homeowner may have been a victim of loan modification scam or may have been
contacted by a perpetrator of such a fraud.
The following are the most common “red flags” cited by consumer protection groups and government
agencies. The scammer:
• Demands payment before providing services.
• Asks that mortgage payments be made to the scammer (with or without promises to forward the
payment to the borrower’s lender).
• Instructs the homeowner not to contact or communicate with his or her lender, lawyer, or credit or
housing counselor.
• Asks the homeowner to transfer the deed or title to the rescuer or someone else, especially by quit-claim
deed.
• Guarantees success in preventing the foreclosure process regardless of the homeowner’s circumstances
or promises to save the homeowner’s credit.
• Operates under a name that sounds like it has government backing or that is almost identical to the name
of a legitimate government assistance program.
Additional “Red Flags” Include a Loan Modification provider that:
• Calls him or herself a “mortgage consultant,” “foreclosure service,” or something similar.
• Encourages the homeowner to lease his or her home so they can buy it back over time.
• Offers to buy the property for a price substantially lower than the value of the property or at a fixed price
that is not set by the housing market at the time of sale.
• Targets people whose homes are listed for foreclosure, often by sending flyers, calling the home, or
soliciting door-to-door.
• Pressures the homeowner to sign a contract or other paperwork before they had a chance to read or
understand it thoroughly, claiming that quick action will be the only way to avoid foreclosure.
• Teams up with a lawyer or a “legal advisor.”
• Provides the homeowner with documents that warn of foreclosure scams.
• Uses documents that appear to have come from the homeowner’s lender.
• Shares cultural, religious, or ethnic similarities with the distressed homeowner and tries to use those
similarities to gain the trust of the borrower.
• Accepts payment only by cash, cashier’s check or wire transfer;
• Offers to fill out paperwork for the homeowner.
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• Gives a partial refund of any fee, while requiring the homeowner to not share information regarding the
“alleged” company with anyone.
• Targets the elderly, offering to assist them in taking out a reverse mortgage loan.
This list is not exhaustive of all indicators that a homeowner may have been defrauded in a loan modification
scam. Moreover, the presence of one or more of these red flags does not conclusively implicate fraudulent
activity. Rather, this list is intended to alert you to signs the homeowner may be a scam victim and to help
you screen homeowners for encounters with scammers.
Alleged Loan Modification Scammers Operating in California
It will most likely be helpful for volunteers to look at the list of alleged loan scammers in your homeowner’s
state. The most up-to-date information can be found at www.preventloanscams.org. Please note, any alleged
scammer listed on the website has otherwise been publically been identified as a potential scammer. The
Lawyers’ Committee, the Network, volunteers, nor any of our partners are permitted to share publically the
names of alleged scammers listed in the Database. This includes in publications, on websites, or with
homeowners.
P RIMARY A NTI -L OAN M ODIFICATION S C AM L AWS – S TATE S PECIFIC
California Senate Bill 94
Starting October 11, 2009 until January 1, 2013, the law, which modifies the California Civil Code, Business &
Professions Code, and Financial Code, prohibits any person or entity from claiming compensation for
negotiating or arranging a loan modification or mortgage loan forbearance service until after that person fully
performs each service as promised. The law also requires that anyone who performs loan modifications to
give the borrower, before entering into any fee agreement, a specified notice stating that paying a third-party
for loan modification services is unnecessary.
Mortgage Foreclosure Consultants Act (MFCA), Cal. Civ. Code § 2945
MFCA regulates issues dealing with foreclosure consultants, imposing restrictions and requirements on these
third parties, such as compensation limits and mandatory disclosures.
A more in-depth review of the state and local laws pertaining to loan modification scams is available in Appendix I.
F ORECLOSURE AND L OAN S CAM R ESOURCES FOR H OMEOWNERS IN C ALIFORNIA
State-specific resources for homeowners, including pro bono legal organizations assisting with foreclosures, loan
modifications, and loan scams are available on the website at www.preventloanscams.org. In addition, the
website includes a list of sites that help connect homeowners with agencies that provide FREE HUD-certified
foreclosure prevention counseling. Please review this resource before contacting any homeowners and be sure to
refer them to the site.
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APPENDIX I – APPLICABLE CALIFORNIA LAWS
C ALIF ORNIA S TATUTES THAT A DDRESS D ISTRESSED H OME OWNE R S CAMS
Primary Anti-Loan Modification Scam Laws
California Senate Bill 94: Prohibition on Advance Fees and Required Notice
Enacted in the fall of 2009, California modified the California Civil Code, Business & Professions Code, and
Financial Code to prohibit the upfront payment of fees by homeowners to anyone assisting with loan
modifications.
What does the law do?
Starting October 11, 2009 and ending January 1, 2013, this law, which applies to loan modification
agreements entered into on or after October 11, 2009:
• Prohibits any person or entity from claiming compensation for negotiating or arranging a loan
modification or mortgage loan forbearance service until after that person fully performs each
service as promised, Cal. Civ. Code § 2944.7(a) (2009), Cal. Bus. & Prof. Code § 10085.6(a) (2009);
• Applies to upfront fees collected by real estate agents and attorneys;
• Prohibits an attorney from requesting or collecting a retainer (as interpreted by the California
State Bar), Cal. Civ. Code § 2944.7(a)(1);
• Per the California State Bar, disallows an attorney from placing an advance fee into a client trust
account and not drawing against the fee until the services have been fully performed (See
http://calbar.ca.gov/calbar/pdfs/ethics/Ethics-SB94-FAQs.pdf); and
• Prohibits any person or entity working on loan modifications from taking any wage assignment,
lien, or any other security to secure the payment of compensation and further does not permit
the taking of a power of attorney from the borrower for any purpose.
Specifically, the law makes it unlawful for any person or firm:
who negotiates, attempts to negotiate, arranges, attempts to arrange, or
otherwise offers to perform a mortgage loan modification or other form of
mortgage loan forbearance for a fee or other compensation paid by the
borrower…to claim, demand, charge, collect, or receive any compensation until
after the [attorney or agent] has fully performed each and every service the
licensee contracted to perform or represented that he, she, or it would
perform. CA Civil Code Section 2944.7(a)(1).
Is the law retroactive?
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Agreements entered into and advance fees collected before October 11, 2009 are not affected. Advance
fees based on agreements entered into before October 11, 2009, but collected after October 11, 2009,
must be fully refunded.
What notice is required to be provided to the borrower?
The law also requires that anyone who performs loan modifications to give the borrower, before entering
into any fee agreement, a specified notice stating that paying a third-party for loan modification services
is unnecessary. Among other provisions, Civil Code Section 2944.6(a) provides:
Notwithstanding any other provision of law, any person who negotiates, attempts to
negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage
loan modification or other form of mortgage loan forbearance for a fee or other
compensation paid by the borrower, shall provide the following to the borrower, as a
separate statement, in not less than 14-point bold type, prior to entering into any fee
agreement with the borrower; and include the following language:
“It is not necessary to pay a third party to arrange for a loan modification or
other form of forbearance from your mortgage lender or servicer. You may call
your lender directly to ask for a change in your loan terms. Nonprofit housing
counseling agencies also offer these and other forms of borrower assistance
free of charge. A list of nonprofit housing counseling agencies approved by the
United States Department of Housing and Urban Development (HUD) is
available from your local HUD office or by visiting www.hud.gov.”
Also, if the loan modification or other mortgage loan forbearance services are offered or
negotiated in Spanish, Korean, Vietnamese, Tagalog, and Chinese, the required statement must
be provided in that foreign language. Civil Code § 2944.6(e).
What else does the law require?
SB 94 also:
• Authorizes DRE to enforce violations by real estate licensees and provides that a violation of
the advance fees provision is a punishable public offense punishable;
• Any agreement with a licensed real estate broker for loan modification services, agreed to
before October 11, 2009 with a broker that did NOT receive a “no objection” letter from the
Department of Real Estate, is still valid. BUT they are NOT permitted to collect any more
advance fees.
o For a list of those individual and corporate real estate brokers who received “no
objection” letters, go to the Department of Real Estate’s site:
http://www.dre.ca.gov/cons_adv_fees_list.asp.
• Makes technical changes to the foreclosure consultant law to describe the entities more
clearly that are exempted from the law;
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• Provides that, under the Banking Law, Credit Union Law, CA Finance Lenders Law, that no
licensee can directly or indirectly charge, or contract for, or receive any interest or charge for
performing services for a borrower in connection with a loan modification or other form of
loan forbearance or forgiveness;
• Does not prohibit a bank, credit union, finance lender, finance broker, residential mortgage
lender, or residential mortgage servicer licensee from: (1) collecting interest or other
charges pursuant to the terms of a loan that has been modified; or (2) accepting payment
from a federal agency in connection with the federal Homeowner Affordability and Stability
Plan or other federal plan intended to help reduce foreclosures; and
• Prohibits any California Finance Lender Law licensee from making a false, deceptive, or
misleading statement, representation, or omission in connection with his or her lending or
brokering activities.
What are the penalties for violations?
Penalties include:
• A $10,000 fine plus one-year imprisonment for individuals, or a $50,000 fine for businesses;
and
• Under new Business and Professions Code § 6106.3(a), an attorney engaging in any conduct
violating this new law would lead to cause for the imposition of attorney discipline.
The Mortgage Foreclosure Consultants Act (MFCA): Cal. Civ. Code § 2945
What does the MFCA do?
The MFCA:
• restricts compensation that can be received by “foreclosure consultants”;
• dictates transactions with foreclosure consultants;
• mandates specific disclosures;
• provides remedies to victims of foreclosure fraud in the form of damages and rescission of
contract; and
• imposes criminal penalties upon unregistered foreclosure consultants.
MFCA rights cannot be waived.
How does the MFCA define “foreclosure consultant”?
CAL. CIV. CODE § 2945.1 provides as follows:
“Foreclosure consultant” means any person who makes any solicitation, representation, or offer
to any owner to perform for compensation or who, for compensation, performs any service in
which the person represents to do the following:
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• Stop or postpone the foreclosure sale;
• Obtain any forbearance from any beneficiary or mortgagee;
• Assist the owner to exercise the right of reinstatement provided in Section 2924(c);
• Obtain any extension of the period within which the owner may reinstate his or her
obligation;
• Obtain any waiver of an acceleration clause contained in any promissory note or
contract secured by a deed of trust or mortgage on a residence in foreclosure or
contained that deed of trust or mortgage;
• Help the owner obtain a loan or advance of funds;
• Avoid or ameliorate the impairment of the owner's credit resulting from the recording
of a notice of default or the conduct of a foreclosure sale;
• Save the owner's residence from foreclosure; or
• Assist the owner obtain from the beneficiary, mortgagee, trustee under a power of sale,
or counsel for the beneficiary, mortgagee, or trustee, the remaining proceeds from the
foreclosure sale of the owner's residence.
Who is exempted from compliance with the MFCA?
Attorneys - CAL. CIV. CODE § 2945.1(b) provides that attorneys are exempt from compliance with the MFCA
when offering foreclosure consulting services in the course of their practice of law. For this reason, many
foreclosure relief fraudsters team up with attorneys in order to by-pass the prohibition on upfront fees.
Real estate brokers - CAL. CIV. CODE § 2945.1(b) also provides an exemption for real estate brokers.
However real estate brokers acting as de facto foreclosure consultants have been denied exemptions. In
re Still, 393 B.R. 896 (Bankr. C.D. Cal. 2008).
What type of conduct does MFCA prohibit?
It is a violation for a foreclosure consultant to:
• Claim, demand, charge, collect, or receive any compensation until after the foreclosure
consultant has fully performed each and every service the foreclosure consultant contracted
to perform or represented that he or she would perform;
• Claim, demand, charge, collect, or receive any fee, interest, or any other compensation for
any reason which exceeds 10 percent per annum of the amount of any loan which the
foreclosure consultant may make to the owner;
• Take any wage assignment, any lien of any type on real or personal property, or other
security to secure the payment of compensation;
• Receive any consideration from any third party in connection with services rendered to an
owner unless that consideration is fully disclosed to the owner;
• Acquire any interest in a residence in foreclosure from an owner with whom the foreclosure
consultant has contracted. Any interest acquired in violation of this subdivision shall be
voidable, provided that nothing herein shall affect or defeat the title of a bona fide
purchaser or encumbrance for value and without notice of a violation of this article.
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Knowledge that the property was “residential real property in foreclosure,” does not
constitute notice of a violation of this article.
• Take any power of attorney from an owner for any purpose, except to inspect documents as
provided by law;
• Enter into an agreement to assist the owner in arranging, or arrange for the owner, the
release of surplus funds prior to 65 days after the trustee's sale is conducted, whether the
agreement involves direct payment, assignment, deed, power of attorney, or assignment of
claim from an owner to the foreclosure consultant or any person designated by the
foreclosure consultant;
• Fail to register with the California Attorney General’s Office and post a $100,000 bond.
What are the elements of an MFCA violation action?
A cause of action for violation of MFCA may be sustained where:
• Defendant is a foreclosure consultant; and
• Defendant violated any provision of Cal. Civ. Code §2945, listed above.
What remedies are available to a distressed homeowner under the MFCA?
The MFCA provides the following remedies:
• Actual damages;
• Reasonable attorneys' fees and costs;
• Appropriate equitable relief; and
• Exemplary damages, in the court’s discretion equivalent to at least three times the
compensation received by the foreclosure consultant in violation of the MFCA, and three
times the owner's actual damages for such violation.
Foreclosure consultants who operate in California but fail to register with the California Attorney
General’s office are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to
$25,000 per violation. Any action brought pursuant to this section shall be commenced within four years
from the date of the alleged violation.
What types of claims have been brought under the MFCA?
The following are examples of the types of civil claims that have been brought successfully under the
MFCA:
• Receipt of compensation before fully performing services. In re McNeal, 286 B.R. 910 (Bankr.
N.D. Cal. 2002) (“[The consultant] demanded, charged, collected and/or received compensation
from the Debtor prior to fully performing the loan modification and foreclosure sale
postponement services he contracted to perform.” (citing Cal. Civ. Code § 2945.4(a))). The court
ordered the consultant to disgorge the fees received back to the Debtor and made an award of
exemplary damages.
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• Failure to include the notice provision required by § 2945.3(b). In re McNeal, 286 B.R. 901, 912
(Bankr. N.D. Cal. 2002) (citing Cal. Civ. Code § 2945.3(g)).
• Failure to attach “Notice of Cancellation” form to agreement, as required by §
2945.3(e). In re McNeal, 286 B.R. 910, 912 (Bankr. N.D. Cal. 2002).
Laws Giving Rise to Civil Liability
Contract Rescission, Cal. Civ. Code § 1689.
Section 1689 states that a party may rescind, or set aside, a contract for a variety of reasons, including
because the party’s consent to the agreement was given by mistake, duress, menace, fraud, or undue
influence.
Credit Services Act of 1984, Cal. Civ. Code § 1789.10, et seq.
This Act regulates companies that offer credit repair services or assistance obtaining loans to those with
poor credit. Among other requirements, the Act prohibits advance fees and mandates that “foreclosure
consultants” register with the U.S. Department of Justice. The law also allows an individual to pursue an
action in a civil case. Violations of the Act face civil liability and criminal sanctions.
False, Deceptive Advertising, Cal. Bus. And Prof. Code § 17500, et seq.
This section prohibits advertising that is knowingly false or misleading, or that should with reasonable
care be known to be false or misleading.
Foreign Language Contract Act, Cal. Civ. Code § 1632, et seq.
Section 1632 requires that if negotiations for certain services were conducted primarily in Spanish,
Chinese, Tagalog, Vietnamese, or Korean, then a fully translated version of any contract in the primary
foreign language must be provided prior to execution. This law applies to most contracts pertaining to
real estate, mortgages, and foreclosure consulting services. Successful claims can lead to contract
voiding, rescission, and/or cancellation.
Home Equity Sales Contracts Act (HESCA), Cal. Civ. Code § 1695, et seq.
HESCA establishes requirements aimed at eliminating deceit, confusion, and fraud in the sale of equity.
Such requirements include documenting a sale in writing and granting a five-day cancellation period for
equity sellers to rescind sales of equity.
Unfair Competition Law (UCL), Cal. Bus. and Prof. Code § 17200, et seq.
UCL protects victims from injuries caused by a defendant’s fraudulent conduct. However, courts have
been unfavorable to plaintiffs making UCL claims in mortgage fraud actions.
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Unlawful Running and Capping for an Attorney, Bus. and Prof. Code § 6152, et seq.
This law prohibits payment and acceptance of most referral fees for legal services.
Welfare Institutions Code, § 15600, et seq.
This law provides extra protection to elders and dependent adults against financial abuse, including the
appropriation of such persons’ money or property with intent to defraud.
Laws Giving Rise to Criminal Liability
Grand Theft: C AL . P ENAL C ODE § 487
What does the Grand Theft provision do?
California’s Penal Code § 487 makes it illegal, by either felony or misdemeanor, for any person to
knowingly and designedly make a false or fraudulent representation or pretense, for the purposes of
defrauding another person of property of a value exceeding $400.
What are the elements of a grand theft action?
A cause of action for violation of California’s Penal Code § 487 may be sustained where:
• Defendant knowingly and intentionally deceived another by making false or fraudulent
representations;
• Defendant’s conduct was intended to persuade the owner to give defendant possession and
ownership of the property; and
• Owner gave the defendant property, in excess of $400, based on defendant’s false or
fraudulent representations.
What penalties apply to a grand theft conviction?
A Grand Theft charge may be filed as a misdemeanor or a felony depending upon the circumstances of
the crime. A misdemeanor is punishable by up to 1 year in a county jail. Conviction of grand theft as a
felony is punishable by up to three years in California State Prison.
In addition to these penalties, a defendant can receive additional and consecutive state prison sentences
for any of the following:
• 1 year if the amount of the property was worth more than $65,000
• 2 years if the amount was worth more than $200,000
• 3 years if the amount was worth more than $1.3 million
• 4 years if the amount was worth more than $3.2 million.
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C ALIFORNIA R ULES OF P ROFESSIONAL C ONDUCT A PPLICABLE TO A TTORNE YS P ROVIDING S ERVICES TO
D ISTRESSED H OMEOWNE RS
What is the California State Bar doi ng to address attorney misconduct i nvolving
homeowners at risk of foreclosure?
The California Bar has formed a 10-person task force, which consists of four lawyers and six investigators, to
work with federal, state and local law enforcement bodies as part of a statewide crackdown on foreclosure
fraud.
Why are foreclosure consultants and attorneys teaming up to defraud homeowners
experiencing mortgage-related distress?
Lawyers are legally permitted to accept fees in advance of providing services. However, foreclosure
consultants are not entitled to receive payment until their loan modification work is completed. As a
consequence, the services of attorneys are very much in demand by some underhanded foreclosure relief
companies which seek to partner with attorneys in an effort to skirt legal obstacles to receiving payments in
advance of rendering services. As discussed below, a number of these partnering arrangements run afoul of
California legal ethics rules.
What types of attorney misconduct relating to foreclosure prevention services are
regulated by the California Bar?
• California lawyers paying referral or marketing fees to foreclosure consultants or other persons for
referring distressed homeowners to the lawyer.
Devious foreclosure consultants may be inclined to propose that a lawyer pay the consultant
a fee in exchange for referring a homeowner client to the lawyer in order to circumvent Civil
Code Section 2945.4(a), which prohibits a foreclosure consultant from collecting a fee from a
distressed homeowner until the consultant’s services have been completed.
However, under applicable California legal ethics rules, a lawyer may not compensate
another for a client referral. Specifically, under Cal. Rules of Prof. Conduct Rule 1-320(B), “A
member shall not compensate, give, or promise anything of value to any person or entity for
the purpose of recommending or securing employment of the member or member’s law
firm by a client...”
• California lawyers splitting fees they earn from distressed homeowner clients with foreclosure
consultants.
Pursuant to Rule 1-320(A) of the Cal. Rules of Prof. Conduct, “Neither a member nor a law
firm shall directly or indirectly share legal fees with a person who is not a lawyer...”
• California lawyers aiding a foreclosure consultant in the unauthorized practice of law.
For example, California lawyers may not form partnerships or joint ventures with foreclosure
consultants if any of the activities of any such business would involve providing legal
services. Cal. Rules of Prof. Conduct Rule 1-310 provides, in relevant part, that “A member
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shall not form a partnership with a person who is not a lawyer if any of the activities of that
partnership consist of the practice of law.”
In addition, California lawyers may not, under the guise of serving as in-house counsel for
foreclosure consultancy businesses, perform legal services on behalf of distressed
homeowners. Cal. Rules of Prof. Conduct Rule 1-300(A) provides, in relevant part, that “A
member shall not aid any person or entity in the unauthorized practice of law.”
• California lawyers contacting in person or by telephone distressed homeowners referred to them by
foreclosure consultants unless the lawyers have a family or prior professional relationship with the
distressed homeowners so contacted.
Cal. Rules of Prof. Conduct Rule 1-400(C) specifies that “A solicitation shall not be made by or
on behalf of a member or law firm to a prospective client with whom the member or law
firm has no family or prior professional relationship...”
A "solicitation" in the meaning of this rule includes in person and telephone
communications. A lawyer, however, may write to a distressed homeowner who is a
prospective client.
• California lawyers intentionally or recklessly failing to perform legal services with competence.
Under Cal. Rules of Prof. Conduct Rule 3-110(A), “A member shall not intentionally,
recklessly, or repeatedly fail to perform legal services with competence.”
• California lawyers accepting fees for little or no work.
Pursuant to Rule 4-200(A) of the Cal. Rules of Prof. Conduct, “A member shall not enter into
an agreement for, charge, or collect an illegal or unconscionable fee.” The unconscionability
of a fee is determined by multiple factors, including the amount of the fee in proportion to
the value of the services performed and the time and labor required in order to earn the fee.
L OC AL R EGULATIONS THAT A DDRESS D ISTRESSED H OMEOWNERS S CAMS
Los Angeles – Mortgage Modification Consultants
(Los Angeles Municipal Code, Ch. IV, Art. 7.2)
What does this ordinance do?
This ordinance was enacted by the Los Angeles City Council in 2009 to regulate individuals or entities that
offer foreclosure consulting or mortgage modification services before the recordation of a Notice of
Default to homeowners of principal residences in the City of Los Angeles.
As noted by the City Council, this ordinance fills the void of pre-Notice of Default protections: “California
State law currently regulates the activities of people who offer to arrange for service, among other things,
to cure mortgage defaults after a property is in foreclosure as evidenced by the recording of a Notice of
Default pursuant to California Civil Code Section 2924, but there exists no state regulation of such people
who offer or provide such services prior to the recording of a Notice of Default.” Los Angeles Municipal
Code Section 47.102(E).
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These services can include any of the following:
• Contacting or negotiating with a lender to modify the interest rate, principal balance, or
terms of a loan before a Notice of Default is recorded;
• Preventing the recording of a Notice of Default;
• Obtaining forbearance from a lender before a Notice of Default;
• Obtaining a waiver of an acceleration clause in a mortgage contract before the recording of a
Notice of Default;
• Helping a homeowner get a loan or advance of funds to cure a mortgage default when there
is no recorded Notice of Default;
• Avoiding or ameliorating the homeowner’s credit because of a threat of a Notice of Default;
or
• Saving the homeowner’s residence from a threatened foreclosure.
Like California’s Mortgage Foreclosure Consultants Act, the ordinance does not apply to attorneys, who
provide loan modification services during the course of their legal practice, and some real estate brokers.
What are homeowners’ rights under the law?
Written Contract
A contract for mortgage modification services must be in writing and fully disclose the exact nature of the
consultant's services as well as the total amount and terms of the compensation.
The contract must have on the first page, in a type size no smaller than that generally used in the body of
the document, each of the following:
• Name, mailing address, email address, and fax number of the consultant to which the notice
of cancellation is to be mailed.
• The date the homeowner signed the contract.
Right to Cancel
A homeowner can cancel a contract with a loan modification consultant within seven (7) days of signing it,
or until the consultant complies with all the contract requirements outlined in the ordinance. The
homeowner can cancel the contract by sending via mail a written notice of cancellation to the consultant
at the address specified in the contract, or by fax or email at the number or address identified in the
contract.
Required Notice of Cancellation and Free Services
Any contract for services must include, next to the space for the consultant's signature, in at least 14-
point bold type, the following statement:
______________________________________________________________
NOTICE REQUIRED BY THE CITY OF LOS ANGELES
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You, the owner, may cancel this transaction at any time prior to midnight of the
seventh calendar day after you sign this contract. Cancellation occurs when you
give written notice of cancellation to the other party to this contract at the party's
address identified in this contract, or by facsimile or electronic mail at the number
or address identified in this contract.
It is not necessary to pay a third party to arrange for a loan modification or other
form of forbearance from your mortgage lender or servicer. You may call your
lender directly to ask for a change in your loan terms. HUD approved nonprofit
housing counseling agencies also offer these and other forms of borrower
assistance free of charge. A list of nonprofit housing counseling agencies
approved by the United States Department of Housing and Urban Development is
available from your local HUD office.
You may also reach HUD approved counselors through the Homeownership
Preservation Foundation.
The contract must be accompanied by a completed, duplicate form entitled
"Notice of Cancellation," in the same language used in the contract with at least
14-point type.
The consultant must provide the homeowner a copy of the contract and the
attached notice of cancellation.
___________________________________________________________________
Foreign Languages
The contract for services must be written in the same language that the consultant primarily used to
describe his/her services or to negotiate the contract, and before the contract is signed the consultant
must give the homeowner a copy of the completed contract written in the language primarily used in the
communications between the consultant and the homeowner.
If English was the primary language used, then the consultant must tell the homeowner orally and in
writing about the right to ask for a completed copy of the contract in Spanish, Chinese, Tagalog,
Vietnamese, or Korean.
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What types of conduct are regulated and prohibited under the ordinance?
The Los Angeles City Ordinance applies the post-Notice of Default regulations provided by California Civil
Code § 2945 (see above) to pre-Notice of Default activity in Los Angeles City.
A loan modification consultant CANNOT:
• Perform any service without a written contract;
• Claim or receive any compensation until the consultant has fully performed all services
contracted to perform;
• Take a wage assignment, lien against real or personal property, or other security to secure the
payment of compensation;
• Receive consideration from a third party in connection with services for the homeowner unless
the consideration is fully disclosed to the homeowner at the time the contract is entered into;
• Acquire an interest in the homeowner's residential property;
• Take a power of attorney from a homeowner for any reason; or
• Induce the homeowner to waive any rights outlined in this ordinance.
Who can bring an action?
The Ordinance allows for a private cause of action. Section 47.108 provides that any person may bring an
action against a Mortgage Modification Consultant for any violation of this Article, and a Mortgage
Modification Consultant may be liable in a civil action for damages up to three times the amount of actual
damages, attorneys' fees and costs of litigation.
San Francisco – Regulations for Mortgage Modification Consultants
(Ordinance 203-09, San Franci sco Police Code, Article 27)
What does this ordinance do?
San Francisco Ordinance 203-09 protects any homeowner of a principal residence in the City or County of
San Francisco.
The San Francisco ordinance regulates "Mortgage Modification Consultants", which includes
companies/individuals that get paid to offer or perform foreclosure consulting or mortgage modification
services BEFORE a Notice of Default is recorded.
These services can include any of the following:
• Contacting or negotiating with a lender to modify the interest rate, principal balance, or terms of
a loan before a Notice of Default is recorded;
• Preventing the recording of a Notice of Default;
• Obtaining forbearance from a lender before a Notice of Default;
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• Obtaining a waiver of an acceleration clause in a mortgage contract before the recording of a
Notice of Default;
• Helping a homeowner get a loan or advance of funds to cure a mortgage default when there is
no recorded Notice of Default;
• Avoiding or ameliorating the homeowner's credit because of a threat of a Notice of Default;
• Saving the homeowner's residence from a threatened foreclosure.
Like California's Mortgage Foreclosure Consultants Act, the ordinance does not apply to attorneys, who
provide loan modification services during the course of their legal practice, and some real estate brokers.
What types of conduct are regulated and prohibited under the ordinance?
A Mortgage Modification Consultant CANNOT:
• Perform any service without a written contract;
• Claim or receive any fees until the consultant has obtained a written loan modification offer for
the homeowner that EITHER reduces the homeowner's monthly loan payment by at least 20
percent for a minimum of five years OR reduces the homeowner's monthly payment for housing
expenses that does not exceed 31 percent of the owner's monthly gross income for a minimum
of five years.
• Take a wage assignment, lien against real or personal property, or other security to secure the
payment of compensation;
• Receive consideration from a third party in connection with services for the homeowner unless
the consideration is fully disclosed to the homeowner at the time the contract is entered into;
• Acquire an interest in the homeowner's residential property;
• Take a power of attorney from a homeowner for any reason; or
• Induce the homeowner to waive any rights outlined this ordinance.
What are homeowners’ rights under the law?
Written Contract
A contract for mortgage modification services must be in writing and fully disclose the exact nature of the
Consultant's services as well as the total amount and terms of the compensation.
The contract must have on the first page, in a type size no smaller than that generally used in the body of
the document, each of the following:
• Name, mailing address, email address, and fax number of the Consultant to which the notice of
cancellation is to be mailed.
• The date the homeowner signed the contract.
Right to Cancel
A homeowner can cancel a contract with a Mortgage Modification Consultant within fourteen (14) days of
signing it. The homeowner can cancel the contract by sending via mail a written notice of cancellation to
the Consultant at the address specified in the contract, or by fax or email at the number or address
identified in the contract. Until the Consultant complies with all the contract requirements outlined in the
ordinance, the homeowner may cancel the contract.
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Required Notice of Cancellation and Free Services
Any contract for services must include, next to the space for the Consultant's signature, in at least 14-
point bold type, the following statement:
_____________________________________________________________________________________________
NOTICE REQUIRED BY THE CITY AND COUNTY OF SAN FRANCISCO
You, the owner, may cancel this transaction at any time prior to midnight of the
fourteenth calendar day after you sign this contract. Cancellation occurs when
you give written notice of cancellation to the other party to this contract at the
party's address identified in this contract, or by facsimile or electronic mail at the
number or address identified in this contract.
It is not necessary to pay a third party to arrange for a loan modification from
your mortgage lender or servicer. You may call your lender directly to ask for a
change in your loan terms. Nonprofit housing counseling agencies also offer
borrower assistance free of charge. A list of nonprofit housing counseling
agencies approved by the United States Department of Housing and Urban
Development (HUD) is available by calling 888-995-HOPE (4673) or by visiting
www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm.
The contract must be accompanied by a completed, duplicate form entitled
"Notice of Cancellation," in the same language used in the contract with at least
14-point bold type.
___________________________________________________________________
The Consultant must provide the homeowner a copy of the contract and the attached notice of
cancellation.
Foreign Languages
If the Consultant offered or negotiated services primarily in Spanish, Chinese, Tagalog, Vietnamese, or
Korean, the Consultant must provide the homeowner, before signing the contract, with a translated copy
of the completed contract in that language.
If English was the primary language used, the Consultant must tell the homeowner orally and in writing,
before signing the contract, about the right to ask for a completed copy of the contract in Spanish,
Chinese, Tagalog, Vietnamese, or Korean.
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Private Right of Action
A homeowner may bring a civil lawsuit against a Mortgage Modification Consultant for alleged
violations. A Consultant can be liable for damages up to three times the amount of actual damages,
reasonable attorneys' fees.
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APPENDIX II – CALIFORNIA LOAN MODIFICATION SCAM ENFORCEMENT
E NFORCEMENT E FF ORTS AT THE S TATE L E VEL
California Attorney General’s Office
The California Attorney General’s Office has been one of the most active offices in the nation in pursuing
mortgage rescue scammers. In August 2009, threatening possible criminal and civil prosecution, Attorney
General Brown ordered 386 mortgage foreclosure consultants to register with his office and post $100,000
bond. Brown also ordered more than two dozen foreclosure assistance companies to substantiate suspect
claims made on the Internet and in direct mail advertising. This action followed a nationwide sweep in July
that led to lawsuits against 21 individuals and 14 companies who allegedly ripped off thousands of
homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down more than 30
companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive
loan modification consultants.
Resources:
• Hotline: 1-800-952-5225
• Website: http://ag.ca.gov/loanmod/
• Services:
o The website:
Lists the individuals and businesses that Brown has sued because of
alleged rescue scam activities.
Provides tips to avoid from being scammed.
Provides a lookup to determine if a foreclosure consultant is registered.
Directs consumers who believe they have been scammed to call their
hotline or file an online complaint with the AG’s Office, FTC, Department of
Real Estate, and State Bar of California.
Encourages people to consider submitting a Small Claims Court action
where successful complainants can recover up to $7,500. California State
Bar
California Department of Corporations
The Department of Corporations provides protection to consumers, and services to businesses, engaged in
financial transactions. The Department licenses and regulates a variety of businesses, such as securities
brokers and dealers, investment advisers and financial planners, and certain fiduciaries and lenders. In
addition, the Department brings enforcement actions against people or companies perpetrating frauds,
making misrepresentations, and pursuing predatory practices. The website provides a look-up for consumers
to research licensees.
Resources:
• Website: http://www.corp.ca.gov/default.asp#
• Check for licenses: http://www.corp.ca.gov/FSD/licensees/default.asp
• File a complaint: http://www.corp.ca.gov/ENF/complaint.asp
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California Department of Real Estate
The California Department of Real Estate (DRE) protects and serves the interests of the public in real estate
transactions and provides related services to the real estate industry. The DRE has filed over 400 desist-and-
refrain orders and/or accusations against companies performing loan modifications. Homeowners can look up
the names of these companies on the DRE’s site and then contact the DRE to inquire about what has
happened with the order against a particular company or individual.
In addition, consumers can search for an individual’s or company’s licensing information from the DRE,
Department of Corporations, Department of Financial Institutions, and the Office of the Real Estate
Appraisers.
Homeowners can also file complaints about companies on the DRE’s consumer protection website,
http://www.dre.ca.gov/cons_protect.html, as well as find many useful links, such as information about
foreclosure rescue scams and how consumers can protect themselves from those scams.
Resources:
• Website: http://www.dre.ca.gov/cons_protect.html
• Check companies with desist and refrain orders: http://www.dre.ca.gov/cons_drs.asp
• Check financial and real estate licenses: http://search.dre.ca.gov/integrationaspcode/
• Check broker or salesperson licenses: http://www2.dre.ca.gov/PublicASP/pplinfo.asp
File a complaint with the DRE: http://www.dre.ca.gov/cons_complaint.html
California State Bar
The California State Bar has created the California State Bar Loan Modification Task Force, which works with
federal, state, and local law enforcement as part of a statewide crackdown on foreclosure fraud. The State
Bar regularly issues ethics alerts on its website warning homeowners of violations committed by attorneys and
news releases providing updates on attorney resignations and disbarments because of loan modification fraud
investigations. On the website, individuals can locate a local attorney referral service; address a fee dispute
with an attorney; search an attorney’s record; and file complaints against attorneys.
Resources:
• Website: http://calbar.ca.gov/state/calbar/calbar_home.jsp
• Check an attorney’s bar record: http://members.calbar.ca.gov/search/member.aspx
• File a complaint against an attorney using:
o Hotline: 1-800-843-9053
o Online form:
http://www.calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10179&id=1144
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E NFORCEMENT E FF ORTS AT THE L OC AL L EVEL
Local Offices and Agencies
Los Angeles County Board of Supervisors - Real Estate Fraud/Predatory Lending Task Force
In January of 2009, the Los Angeles County Board of Supervisors created a new Real Estate
Fraud/Predatory Lending Task Force to help homeowners who may have been victimized by predatory
lending practices. The County Board has a resource center on its website. In addition, homeowners can
file a claim for damages to person or property.
Resources:
• Website: http://bos.co.la.ca.us/Main.htm
• File a claim for damages: http://bos.co.la.ca.us/PDFs/ClaimForDamages.pdf
• Contact the County Board: http://bos.co.la.ca.us/Categories/ContactUs.htm
Los Angeles County Department of Consumer Affairs
The Department serves consumers in Los Angeles County and provides services related to consumer
protection, real estate fraud, and homeowner assistance, senior abuse and fraud protection, and Small
Claims Court. Specifically, the Department provides counseling, investigates complaints, and is the central
reporting agency for real estate fraud for the County. Homeowners can find information about how to
survive the housing crisis on the Department’s website.
Resources:
• Website:
o http://dca.lacounty.gov/.
o http://dca.lacounty.gov/TSForeclosure.html
• Consumer Protection Hotline: 1-800-593-8222
• Real Estate Fraud and Homeowner Assistance Hotline: 1-800-973-3370
• File a complaint: http://dca.lacounty.gov/forms.htm#CompForm
Los Angeles County District Attorney’s Consumer Protection Division –
Real Estate Fraud Task Force
The Task Force is comprised of representatives from the Department of Real Estate, County Department
of Consumer Affairs, County Registrar Recorder, Los Angeles Police Department, Los Angeles County
Sheriff’s Department and County Assessor’s Office. The group is currently investigating several types of
foreclosure rescue fraud cases, including home equity sales contract fraud and mortgage foreclosure
consultant fraud. The Task Force meets monthly and shares information on current trends and cases
being investigated. The Los Angeles District Attorney’s website includes information and tips about how
to avoid foreclosure, and further directs homeowners where to find help.
Resources:
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• Website: http://da.co.la.ca.us/cpd/foreclosure.htm
Orange County District Attorney’s Office
Homeowners can submit an online report about real estate fraud in the Orange County area. In addition,
on the website, the Orange County District Attorney’s Consumer Protection Unit offers general tips and
resources for economic crimes.
Resources:
• Website: http://orangecountyda.com/home/index.asp?page=54
• File a complaint:
o http://orangecountyda.com/docs/consumer_complaint_form__2_.pdf
o http://orangecountyda.com/docs/RealEstateFraudReportForm.pdf
Sacramento County District Attorney’s Foreclosure Task Force
The Sacramento Housing and Redevelopment Agency, working in partnership with City and County staff
(Code Enforcement, Neighborhood Services, City Attorney and District Attorney) are working to take
strategic action aimed at reducing the rate of foreclosures and minimizing neighborhood
impacts. Homeowners can file a complaint with the Real Estate Fraud Unit or Consumer Unit of the
Sacramento County District Attorney’s Office.
Resources:
• Website: http://www.sacda.org/community/Foreclosure.htm
• File a complaint with the Real Estate Fraud Unit:
o Call: (916) 874-9045
o Online form: http://www.sacda.org/si/PDFs/FraudReport.pdf
• File a complaint with the Consumer Unit:
o Call: (916) 874-6174
o Online form:
http://www.sacda.org/cepd/PDFs/Consumer%20Complaint%20Form%20%28m
ain%29.pdf
San Francisco District Attorney’s Mortgage and Investment Fraud Unit
On October 21, 2009, District Attorney Kamala D. Harris announced the formation of the first stand-alone
Mortgage and Investment Fraud Unit in the San Francisco District Attorney’s Office to investigate and
prosecute financial predators. The United States Department of Justice awarded the SFDA a $1.06 million
grant to establish the unit and intensify local efforts to protect desperate homeowners from mortgage
and investment fraud. The newly created unit, consisting of one prosecutor and two investigators, will be
part of the SFDA Special Prosecution Division. While there is no website for the Unit as of 2009, the
SFDA’s Office has a resource page for crime victims, which includes a helpline and tips on how to avoid
mortgage fraud.
Resources:
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• Website: http://www.sfdistrictattorney.org/page.asp?id=77
• Helpline: (415) 553-9044
Santa Clara County District Attorney’s Office
The Real Estate Fraud Unit of the Office of District Attorney for Santa Clara County consists of three
Deputy District Attorneys, four Investigators and a Senior Paralegal. In its 14½ years, the Unit has become
the county's leading investigative agency for real estate fraud complaints and prosecutions. The Unit's
objectives are to deter and punish those who commit real estate-related fraud, to help obtain restitution
for victims, and to maintain community-based outreach and response. The greatest increase in real
estate fraud in Santa Clara County has been foreclosure related scams, a majority of which are loan
modification scams. The Santa Clara County District Attorney's website includes information concerning
the ongoing prosecution of suspects involved in loan modification scams, as well as contact information
on how to submit a complaint directly to the Real Estate Fraud Unit.
Resources:
• Website: http://www.santaclara-da.org/
Ventura County District Attorney’s Office
In September of 2009, the Office received almost $1.7 million in federal stimulus money to fight real
estate crimes. People who believe they have been victims of real estate fraud can find resources and file
a complaint on the website. In addition, homeowners in Ventura County can access service providers
offering free assistance for real estate-related concerns by calling the Don’t Borrow Trouble Ventura
County Service Provider Hotline, which has Spanish-speaking operators.
Resources:
• Website and to file a complaint: http://da.countyofventura.org/refraud_unit.htm
• Hotline: Dial 2-1-1 or 1-800-339-9597 from a cell phone
Task Forces
California San Joaquin Valley Task Force
In June of 2009, the Task Force was formed to address the growing mortgage fraud problem in the Central
Valley. The group investigates mortgage fraud and foreclosure-rescue scams connected to the real estate
boom and the bust that followed. The group includes representatives from: the DAs’ Offices in Fresno,
Tulare, and other counties, the U.S. Department of Housing and Urban Development, FBI, IRS, and the
Secret Service. (See http://www.allbusiness.com/government/government-bodies-offices/12486929-
1.html.)
Eastern District of California Mortgage Fraud Task Force
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In 2008, the Task Force was established to create a targeted and coordinated approach in prioritizing the
massive volume of referrals made to federal and state agencies. Members of the Task Force include
representatives from: The U.S. Attorney’s Office, the FBI; IRS-CI; the U.S. Department of Housing and
Urban Development; the United States Bankruptcy Trustee’s Office, and the California Department of Real
Estate. (See
http://www.mortgagefraudblog.com/index.php/weblog/permalink/california_mortgage_fraud_task_forc
e_established/.)
SCAM Task Force
In June of 2008, nine federal agencies in Los Angeles established a multi-agency task force to address the
significant crime problem of mortgage fraud in Southern California. The SCAM Task Force investigates
mortgage fraud in two distinct areas known as "fraud for profit," and "fraud for housing." Fraud for profit
or "industry-insider" fraud involves the skimming of equity, falsely inflating the value of the property, or
the issuance of loans based on fictitious properties.
The agencies participating in the SCAM Task Force include: FBI, the United States Attorney's Office -
Central District of California, IRS - Criminal Investigation, the U.S. Postal Inspection Service, the Small
Business Administration - Office of Inspector General, the Social Security Administration - Office of
Inspector General, the U.S. Trustee Program, the U. S. Department of Housing & Urban Development -
Office of General Inspector, the U.S. Department of Veterans Affairs, and the Federal Deposit Insurance
Corporation - Office of Inspector General.
To encourage members of the public to report illegal activity related to mortgages, the SCAM Task Force
established telephonic and online mechanisms accessible to the public. A toll free tip-line has been
created in Los Angeles -- 1-866-959-SCAM. Online complaints are also encouraged and can be submitted
to: SCAM@ic.fbi.gov. Additional information can be found at www.fbi.gov. (See
http://losangeles.fbi.gov/pressrel/2008/la061908.htm.)
Resources:
• Website: www.fbi.gov
http://losangeles.fbi.gov/pressrel/2008/la061908.htm
• To file a complaint:
o Hotline: 1-866-959-SCAM
o Online complaints can be sent to: SCAM@ic.fbi.gov
W EBSITES – A DDITIONAL C ALIF ORNI A F RAUD R ESOURCES
General Mortgage Fraud Resources (including Loan Modification Scams)
Better Business Bureau
Homeowners can go to the Better Business Bureau's (BBB) website to research or file a complaint against
a business. Please note that a new business may not appear on the site. There are branches of the BBB
throughout California. To find the BBB nearest you, go to: http://www.bbb.org/us/find-a-bbb/.
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Resources:
• Check out a business or charity: http://www.bbb.org/us/Find-Business-Reviews/
• File a complaint: https://odr.bbb.org/odrweb/public/getstarted.aspx
Mortgage News Daily
• http://www.mortgagenewsdaily.com/mortgage_fraud/report_California.asp
The Mortgage Fraud Reporter
• http://www.mortgagefraud.org/
The Mortgage Fraud Blog
• http://www.mortgagefraudblog.com/
California Real Estate Fraud Report
• http://www.californiarealestatefraudreport.com/
Additional Mortgage Fraud Resources in California
• http://www.mortgageloan.com/mortgage-fraud/california/
Other National Resources
• Fannie Mae
• Federal Deposit Insurance Corporation
• Federal Reserve
• Federal Trade Commission
• Federal Bureau of Investigation
• Freddie Mac
• Homeowners' HOPE Hotline
• HOPE NOW Alliance
• Making Home Affordable
• Mortgage Bankers Association
• National Consumer Law Center
• National Community Reinvestment Coalition
• National Council of La Raza
• National Fair Housing Alliance
• Neighborhood Assistance Corporation of America
• NeighborWorks America
• U.S. Department of Housing and Urban Development
• U.S. Department of Justice
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APPENDIX III – LOAN MODIFICATION SCAM COMPLAINT FORM
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APPENDIX IV – LOAN MODIFICATION SCAM INTERVIEW QUESTIONS
The following is the interview questions for volunteers following-up with homeowners who previously submitted a
complaint against an alleged scammer. These questions are built into each homeowner’s record in the national
Loan Modification Scam Database and can be accessed and completed online at
http://partnerlogin.preventloanscams.org. To complete the interview, click “edit” for each tab in the
homeowner’s record.
Homeowner Information
First Name
Middle Name
Last Name
Suffix
Home Phone
Work Phone
Cell Phone
Best Time of Day Morning Afternoon Evening
Email
Address
Apt/PO Box
City
State
Postal Code
Age Range
Alleged Scam Company
1) Did anyone offer to help modify your mortgage, either directly, through advertising, or by other means such as a flyer?
Yes or No
2) Were you:
Guaranteed a loan modification
Asked to pay a fee
Asked to sign a contract
Asked to redirect mortgage payments
Asked to stop making loan payments
Asked to sign over title to your property
3) Please provide as much of the following information as possible about the company and or individual that offered you loan
modification or foreclosure assistance:
Company/Organization name:
Person who worked with you:
Additional people at the company/organization:
Address:
Phone:
Website:
Email:
4) Did the company or individual represent that it had as lawyers, attorneys, or “legal advisors” on staff?
If yes, were any of the individuals or company representatives whom you worked with directly identified as lawyers, attorneys,“legal
advisors?”
If yes, please tell me briefly about the direct interaction and communication you had with the lawyer (e.g., how often and for how long you
met with him or her, what services he or she provided you, etc):
5) What is the lawyer or legal advisor’s name?
6) And do you have a business card from the lawyer/legal advisor?
7) When did you find out about the company or individual?
8) How did the company or individual contact you?
Phone-Landline
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Phone-Mobile/cell
Email
Mail
Advertisement
Internet
Radio
Televisions
Newspaper/magazine
Flyer
Approached in person
If approached in person, where were you approached?
I Initiated contact
Other
Don’t remember
9) How did you respond:
Answer cold call
Fax
In person
Internet/Email
Mail
Mobile-text
Other
Phone- 1-900 Number
Phone- International
Phone- Other
Phone- Toll Free
Unknown/Don’t Remember
10) What language were you contacted in?
English
Spanish
Cantonese
Mandarin
Vietnamese
Korean
Other
11) Are you still in contact with the company/individual?
12) Approximate date of Last Contact:
13) What services did the company or individual claim to offer?
Loan modification assistance/consulting
Legal representation
Foreclosure relief/consulting
Offer to purchase your property
Refinancing
Bankruptcy
Reverse Mortgage
Other
Notes:
Alleged Scam Details
1) Did you pay money?
Yes or No
Total paid
2) Why do you believe that the company or individual is involved in a mortgage rescue scam?
It guarantees a loan modification regardless of circumstances
It is not licensed
It required payment of an advance fee
It advised me to stop making my payments or to make my mortgage payments to the company
It did not provide the service I paid for
It did not get me the results promised
It filed bankruptcy petition in my name without my permission
It took title to my home
Other
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3) Were you asked to pay a fee before any services could be provided?
If yes: What were you told the fee was for?
4) Approximately how much did they ask you to pay?
5) Did you pay all or part of the fee?
If yes: Approximately how much did you pay?
6) On approximately what date did you pay?
7) Method of payment:
Cash
Cash Advance
Check-Personal
Check-Certified
Credit Card
8) If you paid by credit card, have you contacted your credit card company to register a dispute?
9) Were you advised to stop making mortgage payments to your loan servicer?
If yes, did you halt payments?
If yes, During what time period did you halt payments?
10) Were you advised to make your mortgage payments to someone other than your loan servicer?
If yes, did you do so?
If yes: To whom did you make the payments?
11) If "Other", provide address payments were sent to:
Address
City
State
Postal Code
12) Approximately how many payments did you make to this entity, and approximately how much did you pay to it total?
Count:
Total:
13) During what period did you make your mortgage payments to this entity?
14) Were you told that the payments would be forwarded to you loan services?
and if so were they?
Method of payment:
Cash
Cash Advance
Check- personal
Check- Certified
Credit Card
15) Did you make any other payments to the individual or company (other than an advance fee or mortgage payments)?
If yes: Approximately how many payments did you make, and how much did you pay (total)?
Count:
Total:
16) On approximately what date(s) did you pay?
17) What were you told the payments were for?
Method of payment:
Cash
Cash Advance
Check- personal
Check-Certified
Credit Card
18) Were you told that you could only pay the company or individual by cash, certified check, or wire transfer?
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19) What services did the individual or company claim it was going to provide in exchange for your payments?
Loan Modification assistance/consulting
Foreclosure relief/consulting
Offer to purchase your property
Refinancing
Bankruptcy
Reverse mortgage
Legal representation
other
Notes:
Additional Alleged Scam Info
1) Did the company or individual guarantee you a loan modification?
2) Did the company or individual guarantee that you would be able to avoid foreclosure?
3) Did you sign any documents provided by the company or individual?
Contract for the company’s service
Contract for an attorney’s services
Transfer of the title of your property
New Mortgage agreement
Agreement not to contact your lender
Agreement to halt your mortgage payments or to make the payments to someone other than your lender
Power of Attorney
Other
If yes: Did you sign any of the following documents or provisions?
4) If you signed a contract, did the person perform the services agreed to in the contract?
5) Did the documents look like they were from your lender?
6) Did the company/individual adequately explain the documents to you, and give you plenty of time to read the documents?
7) Were they written in your primary language?
8) Do you feel that you fully understood what you were signing?
9) Were you advised that you could have your attorney review the documents prior to signing?
10) Were you advised by the company or individual not to contact your lender or loan servicer while the company/individual
provided you services?
11) Were you encouraged to transfer your deed or title to the individual/company, or to a 3rd party?
If yes, did you transfer the title?
If yes: To whom did you transfer the title?
12) How much were you paid for the title, and what was the market value of the property at the time, if known?
Amount:
Value:
13) Were you told that you would be able to buy back the property?
if so, have you done so?
14) Do you have in your possession any advertisements, emails, letters, receipts, contracts, or other documents, or copies of such
documents, from the company or individual?
If yes, would you be willing to send copies to the Lawyers' Committee?
15) Please describe the documents that you are willing to share with the Lawyers' Committee:
16) Do you feel that you received any benefit from the company or individual's services?
If yes, what was the benefit?
17) Have you sought reimbursement from the company or individual?
If yes, how did the company or individual respond?
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18) Have you contacted any government agencies, arbitration services, or attorneys regarding the company or individual?
If yes: Please provide the name, address, and telephone number of the agencies and/or individuals you contacted:
19) Is court action against the company or individual pending?
20) If so, please provide the court district and/or case number, if known:
District Number:
Case Number:
Home and Mortgage Information
1) Mortgage Name:
2) Type of property for which mortgage rescue assistance was offered:
First Home
Second/Vacation Home
Business
Other
3) Are you currently living in the property covered by the mortgage?
If no, provide the address of the property covered by the mortgage:
4) Tax Parcel ID number:
5) Year purchased property:
6) Do you currently own the property?
7) Has the property been foreclosed on or is it in the foreclosure process?
Has been foreclosed
Is in Foreclosure Process
No-neither
Not sure
8) If selected “In foreclosure process” or “Unsure”:
9) Have you received a Notice of Default, and if so, when did you receive it?
Date:
10) Have you received a Notice of Sale and if so, when did you receive it?
Date:
11) Please provide the court district and case number for the proceedings, if known:
Court District:
Case Number:
12) Are you currently in bankruptcy proceedings?
If yes, please provide the court district and case number for the proceedings, if known:
Court District:
Case Number:
13) Have you been served any court documents?
If yes:
What Type/Title of documents?
14) Please provide the court district and case number listed on the documents, if any:
Court District:
Case Number:
15) Information regarding your first mortgage:
16) Mortgage Identification Number:
17) If unable to find, ask for original loan amount :
18) Is the mortgage in your name only?
If no, please provide the full names of any other borrowers named on your mortgage:
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19) Are you behind in payments?
If yes, Number of Months Behind:
20) Have you spoken to your lender directly about modifying your loan?
If yes, what was their response?
--- Second mortgage Information ---
21) Do you have a second mortgage on the property?
22) Mortgage Identification Number:
23) If unable to find, ask for original loan amount :
24) Is the mortgage in your name only?
If no, please provide the full names of any other borrowers named on your mortgage:
25) Are you behind in payments?
If yes, Number of Months Behind:
26) Have you spoken to your lender directly about modifying your loan?
If yes, what was their response?
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