Section 47 Foreclosure Rescue Scams

• Library: Consumer Law and Practice 2010

Foreclosures are on the rise. Renae Merle, Mortgage Troubles Rise to Record Levels, Recession, Job Losses Driving Distress, Wash. Post, Dec. 8, 2008. Distressed homeowners threatened with foreclosure, and desperate to save their homes, may fall prey to foreclosure scams. As foreclosures rise, so do the scam artists. Return of the Predators, N.Y. Times, Nov. 24, 2008, at A24. The homeowner may be flooded with offers of quick fixes that ultimately leave them poorer. Unscrupulous foreclosure rescuers appear, promising help that they have no intention of delivering. The foreclosure rescue schemes involve bilking a distressed homeowner of their cash by charging excessive fees and sometimes even tricking them out of their home through buy-back schemes.

Both federal and state authorities may take legal action against foreclosure rescue schemes. But since Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007) - see, § 4.48, infra - state regulators are limited in applying state laws to federal lending institutions. Under 15 U.S.C. § 45, the FTC (Federal Trade Commission) has authority to regulate unfair and deceptive behavior of mortgage lenders. The FTC also enforces specific lending laws, such as TILA and HOEPA, and enforces laws regulating servicers in accordance...