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United States Government Accountability Office

GAO

Report to Congressional Requesters

July 2010

HOMEOWNERSHIP
PRESERVATION
Federal Efforts to
Combat Foreclosure
Rescue Schemes Are
Under Way, but
Improved Planning
Elements Could
Enhance Progress

GAO-10-787

July 2010

HOMEOWNERSHIP PRESERVATION
Accountability Integrity Reliability

Highlights
Highlights of GAO-10-787, a report to
congressional requesters

Federal Efforts to Combat Foreclosure Rescue
Schemes Are Under Way, but Improved Planning
Elements Could Enhance Progress

Why GAO Did This Study

What GAO Found

One of the most devastating
aspects of the current financial
crisis for homeowners is the
prospect of losing their homes to
foreclosure, and many
homeowners have fallen victim to
foreclosure rescue and loan
modification schemes. In 2009, the
administration created the
Financial Fraud Enforcement Task
Force (FFETF), which is led by the
Department of Justice (DOJ), to
combat these and other financial
crimes. This report examines
(1) the nature and prevalence of
these schemes, (2) federal efforts
coordinated to combat these
schemes and other major efforts,
and (3) factors that may affect
federal efforts’ success in
combating these schemes. To
address these objectives, GAO
obtained information from federal
agencies participating in the
FFETF and interviewed
representatives of five states with
high exposure to potential
foreclosures and nonprofit
organizations undertaking related
activities.

Although data that would establish the prevalence of foreclosure rescue and
loan modification schemes are limited, officials told GAO that these schemes
can take several forms—the most active scheme is one in which individuals or
companies charge a fee for services not rendered. Agency and nonprofit
officials said that the perpetrators of these schemes are likely to be former
mortgage industry employees, professional scam artists, and unethical
attorneys and that the range of potential victims is wide. Law enforcement
officials said that the nature of the schemes makes them difficult to combat
because they can easily be conducted by Internet or across state lines. While
law enforcement agencies and nonprofits have information, such as research
studies and consumer complaints, that supports their belief that these
schemes are widespread, there are no nationwide data that can reliably be
used to describe their prevalence.

What GAO Recommends
GAO is recommending that the U.S.
Attorney General direct DOJ to
develop clear, long-term strategies
and performance measures that
DOJ can use to evaluate its
progress toward combating
mortgage fraud, and consider
developing strategies specific to
foreclosure rescue schemes. DOJ
concurred with these
recommendations.

View GAO-10-787 or key components.
For more information, contact Mathew J.
Scirè at (202) 512-8678 or sciremj@gao.gov.

Collaborative federal law enforcement efforts and other coordinated efforts
involving federal and private organizations are under way to combat
foreclosure rescue and loan modification schemes. The FFETF was
established in November 2009 to strengthen the efforts of federal, state, and
local agencies to investigate and prosecute a variety of financial crimes,
including foreclosure rescue and loan modification schemes. Prior to the
FFETF, the administration announced a multiagency effort to combat these
schemes in April 2009, for which agencies, notably the Financial Crimes
Enforcement Network and the Federal Trade Commission, took supporting
actions. The FFETF’s Mortgage Fraud Working Group, which has primary
responsibility for coordinating activities related to these schemes, has focused
on facilitating communication and exchanging information among law
enforcement agencies by sponsoring training sessions and conferences. In
addition to the FFETF, there are other major coordinated efforts aimed at
combating these schemes, such as a public-private effort that focuses
primarily on consumer education and outreach.
Several factors may affect federal efforts to combat foreclosure rescue and
loan modification schemes, and lack of a clear, long-term strategy could limit
the FFETF’s effectiveness. Key factors affecting federal success in combating
these schemes include educating consumers about them and coordinating
federal and state law enforcement efforts. The Mortgage Fraud Working
Group has created an action plan that partly addresses these factors but does
not fully incorporate certain key practices to enhance and sustain interagency
collaboration. In particular, the plan largely focuses on short-term strategies,
does not clearly identify members’ roles and responsibilities, and does not
clearly identify performance indicators that would allow it to measure
progress over time. In addition, the plan outlines strategies for addressing
mortgage fraud as a whole and identifies few specific approaches to
combating foreclosure schemes. Without long-term strategies and
performance measures specific to foreclosure schemes, the working group
may be limited in its ability to combat these schemes.
United States Government Accountability Office

Contents

Letter

1
Background
Schemes Often Involve Fees for Services Not Rendered, and
Although Data Are Limited, Federal and State Officials Consider
Them to Be an Important Problem
Federal Efforts to Combat These Schemes Are Part of a Broader
Focus on Mortgage Fraud, and a Public-Private Effort Focuses
on Consumer Education
Several Factors Could Affect the Federal Government’s Success
and the Working Group’s Efforts May Be Limited by Weaknesses
in Its Planning
Conclusions
Recommendations for Executive Action
Agency Comments and Our Evaluation

3

23
28
30
30

Appendix I

Objectives, Scope, and Methodology

32

Appendix II

Comments from the Department of Justice

36

Appendix III

GAO Contact and Staff Acknowledgments

38

7

16

Table
Table 1: Select Federal and State Agencies Involved in Combating
Financial Crimes

6

Figure 1: Number of Home Loan Payments More Than 60 Days Past
Due, by State
Figure 2: Illustration of an Advance-Fee Loan Modification Scheme

4
8

Figures

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GAO-10-787 Combating Foreclosure Rescue Schemes

Abbreviations
BSA
DOJ
EOUSA
FBI
FFETF
FHA
FinCEN
FTC
GSE
HAMP
HUD
OCC
SAR
SIGTARP
USPIS

Bank Secrecy Act
Department of Justice
Executive Office for U.S. Attorneys
Federal Bureau of Investigation
Financial Fraud Enforcement Task Force
Federal Housing Administration
Financial Crimes Enforcement Network
Federal Trade Commission
government sponsored enterprise
Home Affordable Modification Program
Department of Housing and Urban
Development
Office of the Comptroller of the Currency
Suspicious Activity Report
Special Inspector General for the Troubled Asset
Relief Program
U.S. Postal Inspection Service

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GAO-10-787 Combating Foreclosure Rescue Schemes

United States Government Accountability Office
Washington, DC 20548

July 15, 2010
The Honorable Bobby L. Rush
Chairman
Subcommittee on Commerce, Trade,
and Consumer Protection
Committee on Energy and Commerce
House of Representatives
The Honorable Doris Matsui
House of Representatives
One of the most devastating aspects of the current foreclosure crisis is the
prospect that homeowners who cannot afford their mortgage payments
will lose their homes to foreclosure. The dramatic increase in the number
of homes entering foreclosure since 2005—a record high of over 2 million
in the foreclosure inventory in 2009—has presented opportunities for
some individuals and companies to take advantage of homeowners
through schemes that promise but do not deliver relief from pending
foreclosures. These deceptive practices, which typically cost homeowners
thousands of dollars that they can ill afford to spend, are broadly referred
to as foreclosure rescue schemes. Loan modification schemes are a type of
foreclosure rescue scheme in which homeowners are steered away from
legitimate free sources of loan modification assistance, such as those
provided by both the federal government and private financial institutions.
The concern that homeowners seeking to save their homes from
foreclosure can become vulnerable to these schemes has attracted the
attention of consumer advocates, regulators, and law enforcement
agencies. In April 2009, four federal agencies—the Federal Trade
Commission (FTC) and the Departments of Justice (DOJ), the Treasury
(Treasury), and Housing and Urban Development (HUD)—and the Illinois
State Attorney General announced efforts to coordinate information and
resources across agencies to combat these schemes and educate
consumers. On November 17, 2009, in response to concerns about a broad
range of financial crimes relating to the current financial crisis and
economic recovery efforts, including foreclosure rescue schemes, the
President established the Financial Fraud Enforcement Task Force
(FFETF) under the leadership of the U.S. Attorney General to strengthen
the efforts of DOJ in conjunction with federal, state, and local agencies to
investigate and prosecute these crimes. In addition, other federal, state,
local, private, and nonprofit agencies have launched cooperative efforts to

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GAO-10-787 Combating Foreclosure Rescue Schemes

reach out to consumers who have experienced foreclosure rescue and
loan modification schemes and to help others avoid these schemes.
In light of these concerns, as agreed with your offices, we examined
(1) what is known about the nature and prevalence of mortgage
foreclosure rescue and loan modification schemes, (2) the status and
scope of the federal government’s multiagency effort to combat these
schemes and other major efforts, and (3) the factors that may affect the
likelihood that federal efforts will succeed in combating these schemes.
To determine what is known about the nature and prevalence of mortgage
foreclosure rescue and loan modification schemes, we contacted
representatives of the four federal agencies—DOJ, FTC, Treasury, and
HUD—that were identified as participants in the initiative to combat these
schemes in press releases issued in April 2009. In addition, we contacted
representatives of five states that have high numbers of potential
foreclosures—Arizona, California, Florida, Illinois, and New York—and
national nonprofit organizations and other associations that we identified
as actively engaged in addressing these schemes to discuss the nature and
prevalence of the schemes. To identify the status and scope of the federal
government’s multiagency effort and other major efforts to combat these
schemes, we interviewed and obtained related documentation from the
FFETF’s leadership and Mortgage Fraud Working Group; the four federal
agencies that we have previously mentioned; and organizations sponsoring
major efforts in this area, including the members of the Loan Modification
Scam Prevention Network. To identify what factors may affect the
likelihood that federal efforts will succeed in combating these schemes,
we analyzed information from federal and state agencies and national
nonprofit organizations describing challenges to combating foreclosure
rescue and loan modification schemes. We also used our prior work on
practices that can help sustain collaboration among federal agencies to
assess FFETF planning efforts to date and the likelihood that its efforts
will succeed in combating these schemes. 1 See appendix I for more
detailed information on the scope and methodology of the report.
We conducted this performance audit from September 2009 to July 2010 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,

1

GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain
Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005).

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GAO-10-787 Combating Foreclosure Rescue Schemes

appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.

Background

The current foreclosure crisis has provided persons who may perpetrate
mortgage foreclosure rescue and loan modification schemes with
unprecedented opportunities to profit from homeowners desperate to save
their homes. In March 2010, we reported that national default and
foreclosure rates rose sharply from 2005 through 2009, to the highest level
in 29 years. 2 The most recent data from the Mortgage Bankers Association,
which are for the first quarter of 2010, show that the number of home
loans with payments more than 60 days past due, and therefore potentially
facing foreclosure, is 2.7 million. As shown in figure 1, California and
Florida have the highest numbers of potential foreclosures. The
foreclosure process has several possible outcomes, but the homeowner
generally loses the property, typically because it is sold to repay the
outstanding debt or is repossessed by the lender.

2

GAO, Troubled Asset Relief Program: Home Affordable Modification Program Continues
to Face Implementation Challenges, GAO-10-556T (Washington, D.C.: Mar. 25, 2010).

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GAO-10-787 Combating Foreclosure Rescue Schemes

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

N.H.
9,969
Vt.
2,088

Wash.
61,321
Mont.
4,076

Maine
7,168

N.D.
987
Minn.
38,627

Ore.
26,825
Idaho
12,183

S.D.
1,894

Wyo.
2,030

Utah
23,043

Calif.
485,195

Ariz.
98,674

Colo.
40,310

N.M.
11,484

Iowa
12,843

Pa.
78,249
Ind.
Ill.
118,692 50,778

Kan.
12,788

Okla.
17,606

Tex.
155,926

Alaska
2,327

N.Y.
119,829

Mich.
108,667

Neb.
6,595

Nev.
59,907

Wis.
27,636

Mo.
44,425

Ohio
87,570
W.Va.
6,546
Va.
65,846

Ky.
20,621

La.
27,451

R.I. - 9,855
Conn.
28,576
N.J. - 74,169
Del. - 8,336
Md. - 70,500
D.C .- 4,615

N.C.
77,976

Tenn.
51,319
Ark.
13,818

Mass.
48,428

S.C.
38,036
Miss.
18,895

Ala.
35,177

Ga.
129,730

Fla.
279,373

Hawaii
8,071
25,000 or less
25,001 to 50,000
50,001 to 75,000
75,001 to 100,000
100,001 or more

Sources: GAO analysis of the Mortgage Bankers Association’s National Delinquency Survey data (first quarter, 2010); Art Explosion
(map).

In response to the rising number of defaults and foreclosures, the
administration announced the Making Home Affordable Program in
February 2009, which includes a number of programs intended to assist
homeowners facing potential foreclosure, including the Home Affordable

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GAO-10-787 Combating Foreclosure Rescue Schemes

Modification Program (HAMP). Under HAMP, Treasury shares the cost of
reducing the borrower’s monthly mortgage payments with mortgage
holders and investors so that homeowners might realize a reduction in
their monthly mortgage payments. 3 In addition to HAMP, there are other
foreclosure prevention programs aimed at providing assistance to
homeowners, including both governmental and private programs. For
example, the government sponsored enterprises (GSE) Fannie Mae and
Freddie Mac have their own loan modification programs. Refinances are
also available under the GSE Home Affordable Refinance Programs, and
the Federal Housing Administration’s (FHA) Hope for Homeowners
Program, which permits eligible homeowners to lower their monthly
mortgage payments by refinancing their mortgage loans into fixed-term
market rate loans. In addition, individual private financial institutions offer
their own proprietary loan modification programs for homeowners who do
not qualify for HAMP. Moreover, free counseling services, such as those
provided by HUD-certified counseling agencies, are available to
homeowners seeking to avoid foreclosure. One way that homeowners can
access these counseling services is by calling the Homeowner’s HOPE™
Hotline (1-888-995-HOPE), which is run by a nonprofit organization that
works with a coalition of governmental agencies, financial services
institutions, and other nonprofit groups to help homeowners struggling to
make their monthly mortgage payments.
A number of federal and state law enforcement agencies perform different
roles and use different legal authorities in their efforts to combat various
types of financial- and mortgage-related crimes, including protecting
consumers from foreclosure rescue and loan modification schemes (see
table 1). Within the federal government, FTC, the U.S. Postal Inspection
Service, and agencies within DOJ and Treasury all have key roles
regarding the investigation and prosecution of persons who have engaged
in these types of schemes. As we discuss later in this report, State
Attorneys General and regulatory agencies also play key roles in
combating these schemes.

3
In March 2009, Treasury issued the first HAMP guidelines for modifying first-lien
mortgages in an effort to help homeowners avoid foreclosure. HAMP is part of the
Troubled Asset Relief Program.

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GAO-10-787 Combating Foreclosure Rescue Schemes

Table 1: Select Federal and State Agencies Involved in Combating Financial Crimes
Agency

Role in combating crime

FTC

FTC enforces the Federal Trade Commission Act—which prohibits unfair or deceptive acts or
practices—with nonbank financial institutions, such as mortgage brokers (see 15 U.S.C. §§ 41–
58). FTC conducts its own investigations and has civil enforcement authority.

DOJ - Federal Bureau of
Investigation (FBI)

FBI conducts investigations into a range of financial criminal activities. Its National Mortgage
Fraud Team focuses on fraud schemes that involve financial institutions, particularly in the areas
of mortgage fraud and bank failures. FBI also participates in 67 mortgage fraud working groups
and 23 regional task forces across the country.

DOJ - U.S. Attorneys

The U.S. Attorneys are the federal government’s principal litigators and are appointed by the
President of the United States with the advice and consent of the U.S. Senate. There are 93
U.S. Attorneys stationed throughout the United States and its territories. Each U.S. Attorney’s
office has discretion over its distribution of cases and use of resources on the basis of the
priorities and needs of local jurisdictions and communities, therefore the types of cases vary. The
Executive Office for U.S. Attorneys within DOJ provides the U.S. Attorneys with general
executive assistance and direction, policy development, administrative management direction
and oversight, and operational support and helps the U.S. Attorneys coordinate with other
components within DOJ and other federal agencies.

U.S. Postal Inspection Service
(USPIS)

USPIS enforces laws against mail fraud to protect customers from misuse of the postal system,
such as when individuals send mailings with deceptive information or use the mail to defraud,
endanger, or threaten people.

Treasury - Financial Crimes
Enforcement Network (FinCEN)

FinCEN was established in 1990 to provide a governmentwide financial intelligence and analysis
network for law enforcement and in 1994, was delegated authority to administer the Bank
Secrecy Act (BSA), which resulted in an expansion of its operation to include regulatory
responsibilities. To assist more than 275 federal and state law enforcement agencies in their
efforts to combat money laundering, terrorist financing, and other financial crimes, BSA
authorizes FinCEN to require financial institutions to make reports and maintain records on
certain financial transactions that have a high degree of usefulness in criminal, tax, or regulatory
investigations or proceedings, or in the conduct of intelligence or counterintelligence activities,
including analysis, to protect against international terrorism.a

State Attorneys General

State Attorneys General investigate and prosecute violations of state laws regarding unfair and
deceptive practices and fraud.

State regulatory agencies

State regulatory agencies, such as those regulating the mortgage industry or financial
institutions, enforce state laws and requirements and may license individuals and companies
engaged in mortgage activities.
Source: GAO.
a

31 U.S.C. § 5311. BSA requires financial institutions to file Suspicious Activity Reports to inform the
federal government of transactions related to possible financial crimes. 31 U.S.C. § 5318(g).

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GAO-10-787 Combating Foreclosure Rescue Schemes

Schemes Often
Involve Fees for
Services Not
Rendered, and
Although Data Are
Limited, Federal and
State Officials
Consider Them to Be
an Important Problem

Officials with whom we spoke described several deceptive practices
relating to foreclosure rescue and loan modification schemes that
victimize vulnerable homeowners. Most officials are currently concerned
with one particular loan modification scheme in which persons engaging
in a scheme to defraud homeowners charge a fee in advance (typically, a
fee of thousands of dollars) for the service of ensuring the modification of
their mortgage loan to a loan with lower monthly payments, but they do
not provide this service. Law enforcement officials reported that these
schemes are difficult to combat because persons engaging in such
schemes can start up or shut down their activities quickly and can do so
across state lines. Although data that can provide a reliable indicator of
prevalence are limited, information available to federal and state agencies
and nonprofit organizations, such as consumer complaints and the number
of enforcement actions, suggests that these schemes are a problem.

Methods, Persons
Engaging in and Victims of
Schemes Vary, Although
Schemes Often Involve
Fees Charged in Advance
for Services Not Rendered

Many federal and state officials that we interviewed identified the
following two principal types of foreclosure rescue and loan modification
schemes perpetrated against consumers: advance-fee loan modification
schemes and sales-leaseback schemes. These officials more often pointed
to the advance-fee loan modification scheme as the type currently most
prevalent. These schemes are broadly described as follows:
•

Advance-fee loan modification schemes: Federal and state officials with
whom we have spoken, as well as nonprofit studies, reported that these
schemes take the form of a person charging a fee in advance to negotiate
someone’s mortgage with the mortgage lender, often with a money-back
guarantee, then providing little or no services and not refunding the fee. In
25 of the 28 enforcement actions that FTC brought in 2008 and 2009 on the
basis of foreclosure rescue and loan modification schemes, FTC alleged
that the defendants charged an advance fee for services that were not
performed. In addition, information that the Lawyers’ Committee for Civil
Rights Under Law (Lawyers’ Committee) provided to us indicated that as
of May 7, 2010, the average amount paid by homeowners for services they
reported that they did not receive is about $3,000. 4 A National Community
Reinvestment Coalition—a nonprofit organization—study and an FTC

4

The average fee amount represents information provided by consumers in complaints
collected between October 21, 2009, and May 7, 2010, by the Lawyers’ Committee—a
nonprofit organization that works to enforce civil rights in a variety of issue areas,
including fair housing and fair lending, through its pro bono legal network. This
information is based, in part, on data collected by the Homeownership Preservation
Foundation, which administers the Homeowner’s HOPE hotline.

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GAO-10-787 Combating Foreclosure Rescue Schemes

press release, also indicated that persons engaged in this type of scheme
may make misrepresentations to consumers regarding their ability to
obtain a loan modification, such as claiming high success rates or special
relationships with mortgage lenders. 5 For example, 9 of FTC’s 28
enforcement actions alleged that the defendants misrepresented their
affiliation with the federal government, a mortgage servicer or lender, or a
nonprofit organization. In addition, as reported by FTC and evidenced by
research conducted by the National Community Reinvestment Coalition,
these schemes put homeowners in further jeopardy of losing their homes
because they were instructed not to pay their mortgage or not to talk with
the servicer, thereby increasing the likelihood that they would lose their
home to foreclosure. See figure 1 forr an illustration of how this scheme
may work.
Figure 2: Illustration of an Advance-Fee Loan Modification Scheme

Foreclosure prevention offer may
Foreclosure
come by telephone, direct mail,
loan modification
Internet/radio/television ad, etc.
operation
il

Direct ma

98%
CALL
success NOW!
rate

MONEY
BACK
GUARANTEE!

ve
We haalized
specei rtise!
exp

Sample of deceptive claims

$

$

Homeowner pays advance fee of
$3,000 (homeowner may be
instructed not to pay or talk to
mortgage servicer)

Desperate
homeowner
(may be in foreclosure
or have delinquent
payments)

Weeks pass with little or no
action taken by loan modification
operation

ED

LOS

EC
FOR

Homeowner loses advance fee
and potentially his or her home

Sources: GAO analysis of information and publications from FTC and nonprofit organizations; Art Explosion (images).

•

Sales-leaseback schemes: An FTC official, state officials from three of our
five case-study states, and two recent nonprofit studies also cited another

5
National Community Reinvestment Coalition, Foreclosure Rescue Scams: A Nightmare
Complicating the American Dream (Washington, D.C.: March 2010). The National
Community Reinvestment Coalition is a coalition of community groups, including housing
counseling agencies, that works to promote access to affordable housing, among other
things.

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GAO-10-787 Combating Foreclosure Rescue Schemes

type of foreclosure rescue scheme. 6 The names used to describe the
schemes vary, and the methods vary as well. Federal agencies and
nonprofit sources explain that these schemes generally involve someone
convincing a homeowner at risk of foreclosure to transfer the deed of their
home to them as a means of saving the home from foreclosure. The person
then has control of the property and can make money by either taking out
a second loan on the home or selling the home. According to these
sources, the original homeowner is permitted to lease the home from the
person engaging in the scheme and told that he or she may buy the
property back in the future. However, the person engaging in the scheme
may have no intention of selling the property back to the original
homeowner and may make the terms of the buy-back agreement too
difficult for the original owner to comply with, thereby resulting in the
homeowner losing the property. FTC and state officials believe that these
schemes were more predominant before the decline in housing prices
because higher housing prices provided more equity for persons engaging
in the scheme to take from a homeowner, and the loans needed to
refinance the homes were more readily available.
Information provided by federal and state officials indicates that newer
schemes have been emerging. For example, a March 2010 FTC consumer
alert warned consumers to watch out for a forensic mortgage loan audit
scam, which it explained as a “new twist on foreclosure rescue fraud.” In
this scheme, someone charges a fee to conduct an “audit” intended to find
regulatory violations in the mortgage loan origination in order to allow the
homeowner to use the “audit” results to avoid foreclosure, accelerate the
loan modification process, reduce the loan principal, or even cancel the
loan. According to the FTC consumer alert, there is no evidence that
forensic mortgage loan audits will help borrowers obtain a loan
modification or any other foreclosure relief, even if the audits are
conducted by a licensed, legitimate, and trained auditor; mortgage
professional; or lawyer. Similarly, in May 2010, based on information
provided in Suspicious Activity Reports (SAR), FinCEN described
variations of advance-fee scams in which a person promises to eliminate a
homeowner’s mortgage or other debt on the premise that the debts were
illegal or the government would assume responsibility. 7

6

National Consumer Law Center, Desperate Homeowners: Loan Mod Scammers Step in
When Loan Servicers Refuse to Provide Relief (July 2009); and Foreclosure Rescue Scams.
7

Financial Crimes Enforcement Network, Mortgage Loan Fraud: Loan Modification and
Foreclosure Rescue Scams (May 2010).

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GAO-10-787 Combating Foreclosure Rescue Schemes

Federal and state officials and representatives of nonprofit organizations
told us that persons who have conducted foreclosure rescue schemes
include former mortgage industry professionals who had been involved in
the subprime market; career scam-artists; and licensed professionals, such
as attorneys who allow their names or licenses to be used by those
perpetrating schemes to add credibility to their promises to provide relief.
Federal and state officials and nonprofit representatives explained that
former mortgage industry professionals who had been involved in
subprime lending became involved in these schemes because their
businesses had slowed due to the foreclosure crisis and they were looking
for new sources of income. In addition, Federal Bureau of Investigation
(FBI) officials noted that career scam-artists gravitate toward these types
of schemes whenever the federal government creates programs to assist
people in desperate circumstances, such as the programs the government
began promoting in early 2009, because scam-artists can claim that they
are affiliated with a federal program as a way to gain people’s trust. As
indicated by an official from the Florida State Attorney General’s office,
because of coverage in the news media and other public sources, federal
programs provide scam-artists with a “new script” with which they can
attract consumers. Officials from four of our five case-study states also
said that attorneys can provide cover for third parties that perpetrate these
schemes, particularly in states that have laws that prohibit firms from
charging advance fees but have exemptions for licensed attorneys. Most
notably, the State Bar of California, according to one if its officials, created
an internal task force to investigate consumer complaints related to loan
modification companies in California because complaints had increased
significantly between December 2008 and March 2009 regarding attorney
involvement in loan modification schemes. During this period, according
to the official, companies recruited attorneys to circumvent the state law
prohibiting advance fees.
Although federal and state officials lack comprehensive information on the
potential victims of these schemes, officials believe that potential victims
are likely to include anyone desperate to save their home from
foreclosure, regardless of their economic status or demographic
characteristics. For example, many federal and state officials said that
persons engaging in these schemes will target anyone having difficulty in
paying their mortgage loan, and an FTC official and officials from two of
our case-study states said that even wealthy individuals or professionals
may become victims of these schemes if they are unable to pay their
mortgage. However, officials from three of our case-study states also said
that they were specifically aware of schemes in which a particular ethnic
or religious community was targeted. As explained by one state official

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GAO-10-787 Combating Foreclosure Rescue Schemes

and a representative of a local housing nonprofit organization, in these
cases, persons engaged in the schemes gained the trust of those within the
community because they spoke the same language as the homeowners or
had emigrated from the same country.

Nature of These Schemes
Makes Them Difficult to
Combat, and Legal
Approaches Vary by State

State law enforcement officials noted that these schemes are difficult to
combat because state law enforcement authorities are often unable to
locate the persons who committed the schemes or provide restitution to
the victims. Federal and state officials also said that loan modification
schemes in particular are difficult to combat because companies can easily
start up and shut down and can be run solely on the Internet. In addition,
as explained by California and Florida officials, persons engaging in the
schemes often run large-scale operations across state lines, using methods
similar to those of telemarketing schemes that allow them to solicit
customers nationwide. In these operations, a California state official said,
most of the employees work in sales, soliciting customers and obtaining
payments, while performing no work on behalf of the customers. Because
these schemes are operated across state lines, several state officials told
us, they are more difficult for state law enforcement to combat. Officials
said that pursuing out-of-state companies adds increased difficulties in
litigating and enforcing judgments for State Attorneys’ General offices
because they have no jurisdiction over companies being operated across
state lines.
In addition, legal restrictions and authorities vary by state in terms of what
are considered to be prohibited practices regarding these schemes. FTC
has proposed a rule that would, among other things, prohibit for-profit
companies from being paid until they provide the promised services. 8 Four
of our case-study states—California, Florida, Illinois, and New York—have

8

As instructed by section 626 of the Omnibus Appropriations Act, 2009, Pub. L. No. 111-8,
123 Stat. 524 (2009), on June 1, 2009, FTC proceeded with an advanced notice of proposed
rulemaking seeking public comment on the practices of entities other than mortgage
servicers who offer assistance to consumers in dealing with lenders or servicers of their
loans to modify them or avoid foreclosure. 74 Fed. Reg. 26130 (June 1, 2009). On March 9,
2010, FTC published in the Federal Register a proposed rule that, among other things,
(1) instructs that companies promising to get mortgage modifications could not be paid
until they had provided the consumer documentation of mortgage modification in the form
of a written offer from a mortgage lender or servicer and (2) prohibits persons from
providing assistance to entities that they know or consciously avoid knowing are engaged
in a violation of the proposed rules. The rule also provides a limited exemption for
attorneys in connection with certain proceedings. 75 Fed. Reg. 10707 (Mar. 9, 2010).

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GAO-10-787 Combating Foreclosure Rescue Schemes

passed specific laws prohibiting companies that provide these services
from collecting fees in advance, and officials from these states noted that
these laws have helped them to take action against perpetrators of these
schemes, although a Florida official said that these schemes persist
despite the existence of the law. 9 They explained that the existence of
these laws generally allows them to cite a violation without having to
otherwise prove criminal intent, which they explained can be more
difficult to establish.

Although Data That Can
Be Used to Describe the
Prevalence of Schemes Are
Limited, Some Information
Suggests That Schemes
Are an Important Problem

Federal law enforcement agencies with key roles in combating these
schemes—FTC, FBI, and the Executive Office for U.S. Attorneys
(EOUSA)—had limited information that could be used to describe their
prevalence, but most officials with whom we spoke considered these
schemes to be an important consumer protection issue. 10 Of these three
agencies, only FTC had data directly pertaining to these schemes. While
this data does not serve as a precise indicator of prevalence, FTC officials
said that the number of enforcement actions they sponsored in 2008 and
2009 (i.e., 28), as well as the 71 warning letters they sent in response to
their 2009 investigation of related Internet advertising indicated to them
that these schemes pose a problem for consumers. In response to this
concern, FTC provided consumers with the option of identifying these
schemes on its 2009 Internet complaint form, but FTC officials stressed
that while these data indicated a problem, they could not be used as a
measure of prevalence for a number of reasons, one of which is that the
data were self-reported resulting in a nonstatistically valid sample that
cannot be used to predict the prevalence of the problem. 11 FBI officials
told us that they considered these schemes to be a problem on the basis of

9
Cal. Civ. Code § 2945.4(a); Fla. Stat. Ann. § 501.1377(3)(b); 765 Ill. Comp. Stat. Ann.
940/50(a)(1); N.Y. Real Prop. Law § 265-b(2)(b). Arizona, the one state that we contacted
without a law specifically addressing loan modification schemes, passed legislation
requiring that loan modification officers be licensed and undergo criminal background
checks beginning in July 2010. Ariz. Rev. Stat. Ann. §§ 6-991(12)(a)(iii), 6-991.03.
10

We also contacted the HUD Office of the Inspector General and the Office of the Special
Inspector General for the Troubled Asset Relief Program (SIGTARP) and learned that the
primary focus of these offices is the tracking of loan modification fraud perpetrated against
the federal government, such as that associated with HAMP, although SIGTARP has
supported cases related to schemes specifically perpetrated against consumers.

11

FTC’s Consumer Sentinel Network Data Book for January-December 2009 (February
2010) indicated that FTC received 7,927 consumer complaints that consumers categorized
as modification/foreclosure rescue complaints.

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information received from their 56 field offices—50 percent of which
reported the schemes as prevalent and another 20 percent of which
identified them as emerging schemes—as well as their review of SARs that
FinCEN collects from financial institutions. 12 However, they could not
identify the number of investigations they had undertaken, and FBI only
developed plans to modify its case support system to track this
information during the course of our investigation. 13 Because the EOUSA
case management system does not differentiate among the different types
of mortgage fraud, no statistical information is available regarding the
number of cases involving foreclosure rescue schemes in U.S. Attorney’s
offices. However, some U.S. Attorneys in our five case-study states
provided anecdotal observations that support their belief that these
schemes are a problem.
While several law enforcement representatives, including those of FBI and
EOUSA, referred us to SARs as a potential indicator of prevalence,
FinCEN officials said that these reports had limited use for this purpose
due to the many variables associated with SAR filings. 14 FinCEN reported
that analyses of SARs could increase law enforcement’s understanding of
the crime—for example, by identifying the techniques used by the persons
perpetrating the schemes—but FinCEN officials said that these analyses
were of limited usefulness for estimating prevalence. 15 The officials noted
that the primary purpose of SARs is to provide information on known or

12

FBI explained that this information provided to us in May 2010 is its most current as of
that month, but since the nature of its intelligence-gathering process is ongoing,
pinpointing the date of collection from each source would be difficult.

13

FBI has recently developed 18 codes to track mortgage fraud investigations, including
separate codes for foreclosure rescue and loan modification fraud. These codes will be
available for implementation by FBI’s field offices no later than fiscal year 2011.

14

31 U.S.C. § 5318(g). FinCEN’s SAR regulations may be found at 31 C.F.R. §§ 103.15-103.
21. SARs, which are filed by financial institutions, provide information such as the
suspect’s identifying information and relationship to the financial institution, if any; the
dates, types, and losses associated with the suspicious activity; and a narrative explanation
of the suspected violation of law or activity. FinCEN makes these reports and other
analyses available to other federal, state, and local law enforcement agencies to support
their investigations into financial crimes.
15

For example, a February 18, 2010, news release indicated that an increasing number of
filers submitted SARs noting suspicious activity in connection with actual or purported
foreclosure rescue specialists, and that credit card processors noted multiple transaction
charge-backs in accounts held by clients later determined to be loan modification or
foreclosure rescue specialists, after homeowners complained that the specialist failed to
deliver services.

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suspected violations of financial laws or regulations—such as those
prohibiting money laundering or credit card fraud, rather than, for
example, providing information on the specific types of businesses
involved. In addition, FinCEN analysts indicated that many of the activities
reported in SARs were anywhere from 12 to 18 months old, generally due
to a lack of awareness of wrongdoing on the part of the financial
institution at the time the activity occurred. 16
Similar to FTC, law enforcement officials from our five case-study states
told us that these schemes were a significant problem, based on the
number of enforcement actions their agencies have taken pursuant to
these schemes or on the number of consumer complaints they have
received. The California Department of Real Estate described these
schemes as the biggest consumer fraud it faced in 2009 and said that they
initiated over 2,000 investigations into potential loan modification schemes
in that year. The California State Attorney General’s office was pursuing 5
civil and 4 criminal cases as of June 2010, which the official with whom we
spoke considers to be a relatively high number for its office. Similarly, a
representative of the Florida State Attorney General’s office said that in
2009, mortgage foreclosure rescue scams were the most common category
of consumer complaint that his office received, although as of March 31,
2010, these complaints had fallen to second position. Representatives of
the Arizona, Florida, Illinois, and New York State Attorney General’s
offices similarly reported taking enforcement actions against mortgage
fraud cases in general, with foreclosure rescue cases sometimes
accounting for the majority of these actions. The representative of the
Illinois State Attorney General’s office noted that due to the number of
consumer calls related to these schemes, staff members provide responses
to general loan modification questions for callers in addition to handling
their law enforcement duties.
Representatives that we interviewed of nonprofit organizations involved in
housing or related issues (the Homeownership Preservation Foundation,
the Lawyers’ Committee, the National Community Reinvestment Coalition,

16
In these cases, the financial institution filed the SAR upon receipt of additional
information, which may include law enforcement or media interest in a particular type of
activity or person, or a default or foreclosure action that precipitates a review of the
account or account holder activity. While some of these activities are out of date, they have
helped analysts to determine a pattern of fraud, thereby enabling law enforcement agencies
and regulators to focus efforts on individuals and groups that engage in repeat, organized
activities.

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the National Consumer Law Center, and NeighborWorks America®)
likewise reported that they did not have data that could be used to reliably
describe the prevalence of the schemes, but that they consider them to be
a problem on the basis of research they have conducted or information
available to them. 17 This information included the following:
•

Reports about potential schemes submitted to the Homeowner’s HOPE
Hotline: The Homeownership Preservation Foundation, which sponsors
the Homeowner’s HOPE Hotline, has tracked the number of times
consumers have reported that they believe they have been victims of
scams. These statistics indicate that from June 2009, when these statistics
were first kept, until May 9, 2010, about 10,500 callers reported their belief
that they had been scam victims. While these calls represent about
1 percent of callers to the hotline, the foundation believes they indicate a
national problem and in February 2010 dedicated a team to request
specific information about the callers’ experiences. 18 Homeownership
Preservation Foundation representatives told us that this number likely
underestimates the number of callers to the hotline who may have been
scammed, because some callers may not realize that they have been
involved with a scam and therefore may not report it and the foundation
has not actively screened calls for possible victims of scams.

•

Mystery shopping by the National Community Reinvestment Coalition:
To address concerns about these schemes, in mid-2009, the National
Community Reinvestment Coalition used mystery shoppers—that is,
individuals who posed as borrowers delinquent in their mortgage
payments—to call national and local foreclosure prevention service
providers to ascertain the nature of their services. While this study did not
determine whether the assistance would actually have been provided, it
did identify practices that would have been very troubling to homeowners.
For example, in over 50 percent of the telephone calls, the service
providers advised the mystery shoppers not to pay their mortgage and

17

NeighborWorks America® is a national nonprofit corporation created by Congress to
provide financial support, technical assistance, and training for community-based
revitalization efforts. 42 U.S.C. §§ 8101-8107. NeighborWorks America has a network
comprising more than 230 community-based organizations in 50 states.

18

A foundation representative reported that this team utilizes a specific protocol and client
management system to capture the specifics of the situation, including information about
the alleged foreclosure rescue scam organization, client demographics, and a summary of
the situation.

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charged fees that ranged from $199 to $5,600 for different levels of
service. 19
The potential indicators of prevalence used by the agencies we contacted,
such as the number of consumer complaints and law enforcement actions,
all have limitations. As FTC noted, consumers can file complaints with any
number of federal or state agencies, which makes the complaints difficult
to aggregate. Furthermore, FTC noted that it does not have the resources
to validate the large number of self-reported complaints it receives each
year and these complaints may still only represent only a small portion of
potential schemes. Also, as explained by several law enforcement officials,
information on the number of enforcement actions is an imperfect
measure of prevalence because the information is not always timely
(i.e., cases may be prosecuted years after a crime has occurred), and the
number of actions an agency can prosecute is dependent on its priorities
and available resources.

Federal Efforts to
Combat These
Schemes Are Part of a
Broader Focus on
Mortgage Fraud, and
a Public-Private Effort
Focuses on Consumer
Education

The primary multiagency effort to combat financial crimes, including
foreclosure rescue schemes, is the FFETF, which an executive order
established in November 2009. 20 According to members with whom we
spoke, the FFETF expanded previous federal efforts to combat
foreclosure rescue schemes. The FFETF has five working groups, one of
which—the Mortgage Fraud Working Group—is focusing on foreclosure
rescue schemes as well as other types of mortgage fraud. According to
members of the Mortgage Fraud Working Group that we contacted, the
group provides a venue for member agencies to share information on best
practices and to sponsor activities to enhance understanding of mortgage
fraud. 21 While the working group’s primary focus is on law enforcement
activities, members have also expressed interest in supporting consumer
education initiatives. Other efforts designed to protect consumers from
these schemes involve federal, state, nonprofit, and private organizations
and primarily focus on consumer education and outreach.

19

For additional information, see Foreclosure Rescue Scams.

20

Exec. Order No. 13519, 74 Fed. Reg. 60123 (Nov. 17, 2009).

21

The Mortgage Fraud Working Group comprises members from 21 federal and state
agencies or divisions, 5 of which serve as cochairs.

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Current Federal Effort to
Combat These Schemes Is
the FFETF, Which
Incorporated Previous
Federal Efforts

As we have previously discussed, in November 2009, an executive order
established the FFETF to strengthen the efforts of DOJ in conjunction
with federal, state, and local agencies to investigate and prosecute
significant financial crimes and violations relating to the current financial
crisis and economic recovery efforts. The executive order established DOJ
as the lead federal agency for the FFETF. The range of financial crimes
and violations for which the FFETF is responsible is broad, including
among others, bank fraud, mortgage fraud, securities and commodities
fraud, and discrimination. While foreclosure rescue schemes are not
specifically listed in the executive order, DOJ told us that such schemes
are a type of mortgage fraud that falls within the FFETF’s purview.
Moreover, the executive order described the FFETF’s mission and
functions as (1) providing advice to the Attorney General on the
investigation and prosecution of financial crimes and violations when the
Attorney General determines such cases to be significant; (2) making
recommendations to the Attorney General for action to enhance
cooperation among federal, state, local, tribal, and territorial authorities
responsible for the investigation and prosecution of significant financial
crimes and violations; and (3) coordinating law enforcement operations
with representatives of these same authorities. The U.S. Attorney General
is chair of the FFETF, and DOJ appointed an executive director in
February 2010 to oversee its operations.
The FFETF includes 25 federal departments, agencies, and offices, as well
as numerous inspectors general, and state and local authorities. Moreover,
the executive order encourages the FFETF to invite representatives of
state and local law enforcement agencies and specifically the National
Association of Attorneys General and the National District Attorneys
Association to participate in the task force to coordinate law enforcement
operations. In addition, the executive order requires the FFETF to conduct
outreach with representatives of other organizations, such as financial
institutions and nonprofit organizations.
According to some of the FFETF members that we contacted, the FFETF
expands upon the administration’s earlier multiagency effort to combat
financial crimes, including foreclosure rescue schemes, that was first
announced on April 6, 2009. This earlier effort was intended to coordinate
the efforts of federal and state agencies, as well as private sector entities,
to protect homeowners seeking assistance under the Making Home
Affordable Program. According to agency officials, individual efforts
established in relation to the April 2009 announcement, particularly those
by FTC and FinCEN, continue under the respective agencies. Federal
agencies that participated in this announcement—FTC, Treasury

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(FinCEN), HUD, and DOJ—undertook various supporting activities that
sometimes were a continuation of their previous efforts, including the
following examples:
•

FTC officials indicated that the agency had coordinated two enforcement
sweeps in conjunction with other federal and state agencies against
persons perpetrating loan modification schemes, which according to FTC
resulted in over 300 independent enforcement actions. 22 FTC had
undertaken law enforcement actions against companies involved in the
sale of foreclosure rescue services and published its first consumer
warnings about these practices on its Web site in February 2008.
Additionally, FTC officials noted that they had developed a public service
video for distribution to community groups and legal aid offices, among
others.

•

At the time of the April 6, 2009, announcement, FinCEN also issued
guidelines to financial institutions identifying and submitting SARs for
suspected foreclosure rescue scams that it had been developing prior to
the April announcement. 23 FinCEN officials stated that the agency has
devoted significant resources to supporting state law enforcement efforts
to pursue these schemes—for example, by developing a database with
investigative information that could be useful to agencies targeting the
same suspects. In addition, FinCEN provides direct research and
analytical support to state and local law enforcement agencies on
individual cases and provides training to states on how to utilize FinCEN’s
law enforcement support functions—for example, by showing them how
to query its databases. 24

22

On July 15, 2009, FTC announced Operation Loan Lies, which involved 189 actions by
25 federal and state agencies, 4 of which were FTC actions, according to FTC officials. On
November 24, 2009, FTC announced additional enforcement actions under Operation
Stolen Hope, which consisted of 118 actions by 26 federal and state agencies. According to
FTC, the agency filed 6 new complaints under Operation Stolen Hope, none of them jointly
with other state agencies.

23

On April 6, 2009, FinCEN issued guidelines to financial institutions instructing them to
include the phrase “foreclosure rescue scam” in the narrative of any SARs they file related
to these schemes. In May 2010, FinCEN reported that financial institutions had filed a
higher number of relevant SARs after the issuance of these guidelines.
24

According to FinCEN, the agency has provided state and local authorities with statespecific information on SAR filings and other data to help them develop leads on potential
targets of investigation for foreclosure rescue and loan modification schemes. According to
FinCEN officials, the agency has conducted training and outreach on the use of its research
and analytical support tools in 10 State Attorney General offices since December 2009 and
worked with law enforcement officials in these and two other states.

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•

In support of the April 6, 2009 announcement, DOJ established four
working groups to discuss ways of addressing mortgage fraud, including
foreclosure rescue schemes, through information sharing and
coordination. 25 The groups met several times before the creation of the
FFETF, at which point their activities were largely incorporated into the
new larger effort.

•

HUD officials stated that while not in direct response to the April 2009
announcement, the agency used its HUD-approved and HUD-funded
housing counseling network to help borrowers determine their eligibility
for the federal loan modification and refinancing programs we have
previously discussed.
Representatives with whom we spoke of participating federal and several
state agencies said that they derived value from the additional
coordination provided by the April 2009 announcement, noting particularly
that they began to collaborate more closely with other agencies. In
particular, they noted working more closely with FTC, and some state
agencies noted receiving an unprecedented amount of assistance from
FinCEN in using information from SARs for their own investigative leads.
Moreover, some federal and state officials involved in the April 2009 effort
said that the April 6, 2009, announcement was useful in focusing the
federal government’s and the public’s attention on the issue of foreclosure
rescue schemes.

FFETF’s Efforts to Combat
Foreclosure Rescue
Schemes Are Part of Its
Broader Focus on
Mortgage Fraud

DOJ officials told us that while the FFETF’s Mortgage Fraud Working
Group covers different types of mortgage fraud, the working group has
sponsored activities that have contributed to addressing foreclosure
rescue schemes. According to DOJ officials, the working group
coordinates efforts to combat all types of mortgage fraud, including
common “flipping” schemes and organized criminal enterprises preying on
government programs, such as FHA loan guarantee programs, as well as

25

The four working groups were in the areas of criminal enforcement, civil enforcement,
civil rights enforcement, and information sharing. According to DOJ officials, each working
group was chaired by a DOJ official at the level of Assistant Attorney General, as well as a
State Attorney General.

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GAO-10-787 Combating Foreclosure Rescue Schemes

foreclosure rescue schemes. 26 Members of the working group we
interviewed indicated that these schemes were discussed at various
working group meetings. The Mortgage Fraud Working Group keeps
written agendas that describe the presenters and the subjects covered at
meetings, as well as presentation materials and attendance sheets. While
these materials show that foreclosure rescue schemes are discussed at
meetings, the extent of that discussion cannot be determined because the
working group does not keep meeting minutes. Working group members
told us that the meetings provided them with a venue to discuss broader
issues (e.g., best practices on combating mortgage fraud and emerging
schemes), as well as operational issues, but that they generally do not
discuss individual cases. The working group as a whole has met three
times—in December 2009, February 2010, and June 2010—but according
to DOJ officials, members also engage in numerous ad hoc meetings, in
person or by teleconference.
According to DOJ officials, these working group discussions have resulted
in activities that have provided them with additional information about
mortgage fraud and promoted best practices in combating this fraud,
including foreclosure rescue schemes. According to information provided
by the FFETF, the working group hosted mortgage fraud summits during
the first half of 2010 in four cities—Columbus, Detroit, Miami, and
Phoenix—that are in regions of the country that were experiencing high
rates of foreclosure. During these summits, community group members
briefed working group members on the types of mortgage fraud that they
are experiencing, and federal, state, and local law enforcement officials
held separate closed discussions. In early March 2010, the FFETF
conducted a 3-day Mortgage Fraud Task Force course at the National
Advocacy Center for both federal and state law enforcement officials,
which included, among other things, discussions of best practices and
enforcement tools as they relate to different types of mortgage fraud,
including foreclosure rescue schemes. In addition, in late May 2010, the
FFETF conducted another 3-day Mortgage Fraud Seminar at the National
Advocacy Center, including a session specifically focused on foreclosure

26

A property flipping scheme, broadly described, is when a person purchases a home, has it
fraudulently appraised at a higher value, and sells the house to a straw buyer who obtains a
loan amount based on the inflated price. The person engaged in this fraudulent activity
pockets the loan amount, leaving the bank holding a mortgage that is more than the home
is worth. In the case of FHA-related fraud, a person misrepresents their income and
circumstances to qualify for an FHA-insured loan, which can offer more affordable terms
than a conventional loan.

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GAO-10-787 Combating Foreclosure Rescue Schemes

rescue schemes. Members of the Mortgage Fraud Working Group that we
contacted and others aware of its activities expressed a positive view of its
initial efforts to date. For example, several officials involved in the effort
indicated that the working group is creating partnerships and opening
lines of communication, particularly between state and federal agencies.
DOJ officials also reported that the Mortgage Fraud Working Group was
responsible for coordinating Operation Stolen Dreams, a series of federal
and state law enforcement actions undertaken by agencies represented on
the FFETF between March 1, 2010, and June 17, 2010. DOJ reported that
this operation involved more than 1,500 criminal defendants—119 of
whom were allegedly involved in foreclosure rescue schemes—and
191 civil enforcement actions, of which more than 100 pertained to
foreclosure rescue schemes. According to DOJ officials, the
announcement of this sweep to the public reinforced the consumer
awareness and deterrence objectives of the working group.
In addition, FFETF’s leadership, as well as two of its members, indicated
that they are looking for other opportunities to enhance consumer
education. For example, the FFETF launched a Web site
(www.StopFraud.gov) in April 2010 to provide information about FFETF
activities and information for consumers, including descriptions about
foreclosure rescue schemes and how to report them. The Web site
provides links to consumer advisories, including those posted by FTC, the
Board of Governors of the Federal Reserve System, and NeighborWorks
America. In addition, according to FFETF agendas, working group
members have held specific discussions on how to warn the public about
foreclosure rescue schemes.

Other Major Federal,
Private, and Nonprofit
Coordinated Efforts Focus
on Consumer Education
and Information Gathering

In addition to the FFETF, there are other coordinated efforts involving
federal, state, private, and nonprofit entities aimed at addressing the
problem of foreclosure rescue schemes through activities intended to
enhance consumer outreach and education. In June 2009, the Loan
Modification Scam Prevention Network (the Network) was formed
primarily by four organizations—Fannie Mae, Freddie Mac, the Lawyers’
Committee, and NeighborWorks America—to coordinate efforts educating
homeowners about these schemes and to gather information about their

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prevalence. 27 According to a representative of Fannie Mae, coordination is
important to avoid confusing consumers with mixed messages from
different sources. The FFETF Mortgage Fraud Working Group invited a
representative of the Network to describe its efforts at the Mortgage Fraud
Summit in Detroit, Michigan, on April 23, 2010.
As explained by Fannie Mae and the Network’s members, member
organizations support the following activities:
•

Consumer outreach and education: This initiative is primarily led by
NeighborWorks America, which was appropriated $6 million by Congress
in March 2009 to develop a national campaign warning the public about
loan modification scams. 28 NeighborWorks America subsequently
launched the campaign—Loan Modification Scam Alert—in October 2009
and is targeting African American, Asian, Hispanic, and senior
homeowners in
25 areas with high risk of foreclosure. NeighborWorks America has
reported that it has used various media in these areas—print, radio public
service announcements, and its campaign Web site
(www.LoanScamAlert.org)—to reach people and encourage them to dial
the HOPE Hotline for loan modification assistance, find a local foreclosure
counselor, or visit the Web site to learn about or report scams.

•

Obtaining and compiling information about schemes from consumers:
As we have previously described, the Homeownership Preservation
Foundation gathers information from homeowners who call the HOPE

27

In addition to the founding members, the Network includes representatives of
government agencies, such as FTC, HUD, DOJ, Treasury, FBI, and State Attorneys’ General
offices, as well as nonprofit organizations throughout the country. The Network’s efforts
are supported by a $6 million federal appropriation in the Omnibus Appropriations Act,
2009, to the Neighborhood Reinvestment Corporation (NeighborWorks America) for a
public education campaign, and a $160,000 grant from the Federal Deposit Insurance
Corporation to cover expenses from the media campaign’s events in at least four locations.
Pub. L. No. 111-8, 123 Stat. 524 (2009). Additionally, Fannie Mae provided $500,000 and
Freddie Mac provided $150,000 to the Lawyers’ Committee for data collection and to
support government enforcement efforts; Fannie Mae and Freddie Mac each gave $150,000
to the National Fair Housing Alliance—a national consortium of nonprofit organizations
that work on fair housing and civil rights issues—for investigations of loan modification
schemes.

28
Id. In addition, NeighborWorks dedicated $2 million from the $6 million it received under
the Omnibus Appropriations Act, 2009, to provide grants to nonprofit organizations
engaged in efforts to combat loan scams in targeted communities, such as those with
minority populations or senior citizens, and to implement activities under the Loan
Modification Scam Alert campaign.

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Hotline believing they have been subject to a scam and obtains the
homeowner’s consent to provide this information to the Lawyers’
Committee. The Lawyers’ Committee compiles this information, as well as
complaints it has received through its Web-based complaint form, into a
single database. To make the Web-based complaint form accessible to
homeowners, the form is hyperlinked to the Loan Modification Scam Alert
campaign Web site as well as to the Web sites for Making Home Affordable
and the FFETF, which are sites that also list the telephone number of the
HOPE Hotline.
•

Providing Information to FTC: To support federal and state law
enforcement efforts, the Lawyers’ Committee began submitting these data
from its database to the FTC’s Consumer Sentinel complaint database on
May 14, 2010. In April 2010, the Lawyers’ Committee reported that the
primary source of complaints on foreclosure rescue schemes is the HOPE
Hotline.
In addition, federal banking regulatory agencies, such as the Office of the
Comptroller of the Currency (OCC) and the Federal Deposit Insurance
Corporation, have issued consumer advisories containing tips
homeowners can use in identifying and reporting foreclosure rescue and
loan modification schemes and have undertaken other activities to warn
consumers about these schemes. For example, officials from OCC
indicated that the agency also delivered presentations at foreclosure
events that provided homeowners with information about loan
modification options, including HAMP, and alerted attendees to ways in
which they can identify and avoid foreclosure rescue and modification
scams.

Several Factors Could
Affect the Federal
Government’s Success
and the Working
Group’s Efforts May
Be Limited by
Weaknesses in Its
Planning

Our analysis suggests that several factors could be important to federal
efforts in combating foreclosure rescue schemes, especially educating
consumers about deceptive practices and effectively coordinating law
enforcement efforts to combat these schemes. The Mortgage Fraud
Working Group has developed an action plan that addresses some of these
factors in its planned activities. However, the plan does not address
certain key practices that can help enhance and sustain collaboration
among federal agencies, such as a clear long-term strategy and resultsoriented performance measures. Additionally, the action plan does not
identify priorities or strategies for specific types of mortgage fraud
schemes. As a result, the working group may not be optimizing its efforts
to increase enforcement activities in the area of mortgage fraud,
particularly regarding foreclosure rescue and loan modification schemes.

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Several Key Factors May
Affect the Federal
Government’s Likelihood
of Success in Combating
Foreclosure Rescue and
Loan Modification
Schemes

Our analysis of interviews with representatives of federal and state
agencies and nonprofit organizations suggests that several factors may
affect the federal government’s likelihood of success in combating
foreclosure rescue schemes. A broad array of federal and state officials,
including law enforcement officials, as well as representatives of nonprofit
organizations, indicated that it is essential to make consumers aware of
these schemes, to provide them information on legitimate alternatives to
using such services, and to encourage them to report suspicious incidents
to authorities. As noted by several law enforcement agencies, it is easier to
stop a crime from taking place than it is to catch the criminal later and
obtain restitution. Representatives of several nonprofit organizations told
us that implementation of a widespread media campaign—using
newspapers, radio, and television—would be the most effective way of
communicating this information. A representative of NeighborWorks
America also noted that most local organizations do not have the funds to
compete with the money the persons perpetrating the schemes spend on
misleading advertising. A representative of Consumers Union noted that it
was important to find ways of delivering information to hard-to-reach
communities (e.g., those where a large number of the individuals are not
native English speakers or do not have ready access to or proficiency with
computers).
Another factor we identified in our analysis as being important to the
federal government’s efforts is coordinating law enforcement activities.
Representatives of both federal and state law enforcement agencies said
that the coordination of federal and state law enforcement efforts is
important for several reasons, including the need to share investigative
information, consolidate resources, and decide on the most appropriate
legal action and whether a federal or state agency should take the action.
Several law enforcement officials, as well as two nonprofit organizations,
explained that sharing investigative information across agencies was
particularly needed because these schemes are often perpetrated by
entities that operate across state lines. Thus, these and other officials
commented on the usefulness of information—such as complaint
information made available through the FTC’s Consumer Sentinel, SARs
provided by FinCEN, and information that states may have on emerging
schemes—that can be brought to the attention of the federal government.
In addition, some officials mentioned that it is important for different
agencies working on the same case to coordinate their activities to share
information and not duplicate efforts.
The importance of federal and state law enforcement coordination was
also supported by how federal and state officials described their

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GAO-10-787 Combating Foreclosure Rescue Schemes

respective roles. The U.S. Attorneys from most of our five case-study
states told us that they usually only undertake cases in which the dollar
value of the loss is substantial—for example, at least $1 million in the case
of mortgage fraud—or if the nature of the case is particularly complex,
such as cases involving attorneys, title companies, straw buyers, and
financial service providers. According to DOJ officials, U.S. Attorney
offices, given their limited resources, competing demands and differing
crime patterns in various districts, may employ loss thresholds, which
result in the referral of cases to local prosecutors’ offices. Thus, U.S.
Attorneys are less likely to pursue advance-fee schemes, which typically
involve much smaller dollar losses (approximately $3,000 per
homeowner). In contrast, most of the State Attorneys General we
interviewed referred to state laws or regulations that in their view either
discouraged the perpetration of these schemes or made it easier for them
to take enforcement actions. However, representatives of each of these
states also identified the benefits of federal assistance in investigating and
prosecuting these schemes, particularly where they are conducted across
state lines. Several of the state representatives also noted the usefulness of
federal support for their own investigations, such as the training provided
by FinCEN to help understand and interpret Bank Secrecy Act data.
In addition, representatives of several nonprofit organizations and law
enforcement officials noted that strengthening laws could be an important
factor in combating schemes. There is no federal statute specifically
prohibiting foreclosure rescue and loan modification schemes; therefore,
federal agencies rely on investigating and prosecuting under general
federal laws that may have been violated, such as wire fraud and false
advertising, or in assisting state authorities with their investigations and
prosecutions. Several officials noted that a federal law prohibiting the
charging of fees in advance for loan modification services would be more
effective in deterring these schemes than laws enacted as part of a stateby-state approach, and other officials observed that such laws would make
filing enforcement actions easier because they would remove any
ambiguities about whether a crime was committed. Several state and
federal officials also indicated that additional resources were needed to
investigate and pursue more cases.
The Mortgage Fraud Working Group has developed an action plan that
describes the composition and function of the group and that addresses
some of the factors in combating these schemes. The plan articulates the
primary purpose of the working group as being “to increase enforcement
in the area of mortgage fraud, and to do so through greater coordination
among law enforcement agencies, the development and sharing of

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GAO-10-787 Combating Foreclosure Rescue Schemes

enforcement strategies, and training.” The action plan also describes
activities undertaken by the working group between November 2009 and
June 2010 and activities contemplated for the period between late June
2010 and the subsequent meeting of the full Task Force Committee to be
held in late November 2010. Finally, the action plan contains a section that
identifies the metrics that the working group is using or considering for
use in evaluating its progress in the area of mortgage fraud enforcement.
Among these metrics are the proliferation of local mortgage fraud task
forces, number of people trained in mortgage fraud, and number of
enforcement sweeps conducted.
The activities identified in the working group’s action plan address two of
the factors that we identified as being important to the efforts to combat
these schemes—consumer education and law enforcement coordination.
For example, the action plan lays out various proposals on ways to warn
the public about foreclosure rescue schemes but does not specify
agreements on the roles and responsibilities of member agencies, as well
as those that might be developed with nonfederal agencies already active
in this area, in carrying out consumer education efforts. 29 The bulk of the
action plan items focus on activities to improve coordination between
federal, state, and local law enforcement agencies regarding combating
mortgage fraud. Specifically, the action plan identifies the following key
coordination efforts: mortgage fraud summits to be held in additional
cities across the country, and additional mortgage fraud training sessions
to be held at the National Advocacy Center for both federal and state law
enforcement officials. As we have discussed previously, during the
summits, community groups are invited to discuss the types of mortgage
fraud that they are experiencing, and separate sessions are held with
federal, state, and local law enforcement officials to discuss coordination
issues related to mortgage fraud enforcement efforts. The FTC has
proposed a rule that, among other things, restricts practices concerning
companies collecting an advance fee for loan modification services. The
comment period for the proposed rule has closed, and FTC officials said
that they are in the process of reviewing public comments and finalizing
the proposed rulemaking.

29

See the prior section of this report for a description of agencies, such as NeighborWorks
America and the Homeownership Preservation Foundation, already active in warning
homeowners about these schemes.

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GAO-10-787 Combating Foreclosure Rescue Schemes

The Working Group’s
Planning Efforts Do Not
Include Key Collaborative
Practices, Which Could
Limit Its Ability to
Optimize Its Efforts to
Combat Mortgage
Schemes

Although the Mortgage Fraud Working Group’s action plan addresses
some of the factors that could impact the federal government’s success in
combating mortgage schemes, the plan does not include some key
practices that our prior work has found can help enhance and sustain
collaboration among federal agencies. 30 Of the eight practices that we have
found to enhance multiagency coordination efforts, four in particular
appear relevant to the Mortgage Fraud Working Group’s current efforts:
•

defining and articulating a common outcome;

•

establishing mutually reinforcing or joint strategies designed to help align
activities, core processes, and resources to achieve a common outcome;

•

agreeing on roles and responsibilities, including leadership; and

•

developing mechanisms to monitor, evaluate, and report on the results of
the collaborative effort. 31
The Mortgage Fraud Working Group’s action plan does identify common
outcomes or goals for the working group. However, although the goals
outlined in the action plan—increasing coordination among law
enforcement agencies, developing and sharing of enforcement strategies,
and training—appear to be long term in nature, they are supported by
activities that do not go beyond 6-month intervals. The working group’s
action plan also does not discuss the need for the collaborating agencies
to establish strategies that work in concert with those of their partners or
that are joint in nature. Such strategies help in aligning the partner
agencies’ activities, core processes, and resources to accomplish the
common outcome. Additionally, the action plan does not address
agreements on the roles and responsibilities of the working group
members regarding activities to be undertaken to achieve the group’s
goals. Similarly, the performance measurements in the action plan—such
as the frequency of, attendance at, and types of mortgage fraud discussed
at the summits—are useful for evaluating the activities themselves but not
the extent to which the activities have strengthened progress toward the

30

GAO-06-15.

31

The other four practices that we reported can enhance coordination are identifying and
addressing needs by leveraging resources; establishing compatible policies, procedures,
and other means to operate across agency boundaries; reinforcing agency accountability
for collaborative efforts; and reinforcing individual accountability for collaborative efforts.
See GAO-06-15.

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GAO-10-787 Combating Foreclosure Rescue Schemes

broader goal of increasing coordination activities. Without performance
measures that can be used to measure progress toward the working
group’s long-term goal, the working group may not be able to evaluate its
effectiveness in strengthening law enforcement efforts, including efforts to
combat foreclosure rescue schemes, or to determine whether its current
activities are the best ones to strengthen law enforcement efforts and
address the needs of its federal and state members.
In addition, the action plan does not tailor strategies to the various types
of mortgage fraud that the working group addresses. Consequently, the
plan does not include strategies or performance measures that relate to
foreclosure rescue and loan modification schemes. Planning that reflects
the specific nature of these schemes may be important. For example, as
we have previously discussed, schemes often operate across state lines.
State Attorneys General indicated to us that they need federal assistance
in pursuing persons that operate these schemes across the borders of their
states. U.S. Attorneys also told us that they generally do not pursue these
types of schemes due to the need to focus on schemes involving larger
dollar amounts. The lack of strategies to effectively deal with the unique
nature of these schemes may negatively impact the efforts of the working
group to increase coordination among relevant law enforcement agencies
to combat schemes that cross state lines. In addition, the group may be
limited in its ability to develop performance measures related to these
particular schemes.

Conclusions

Because data on the prevalence of foreclosure rescue schemes are limited,
it is difficult to establish a reliable estimate of just how often these
schemes are occurring. Nevertheless, available data and views from a wide
variety of sources suggest that foreclosure rescue schemes are indeed an
important consumer problem and that new types of schemes are emerging.
Furthermore, state law enforcement officials have expressed concern that
schemes can be difficult to combat because they are often perpetrated
across state lines and those engaging in them can relocate the schemes to
other parts of the country very quickly.
While the April 2009 announcement signaled the federal government’s
interest in strengthening efforts to specifically combat foreclosure rescue
schemes, it is not clear to what extent that the announcement resulted in
significant interagency collaboration among the key federal law
enforcement agencies. However, several individual agencies, notably
FinCEN and FTC, appear to have undertaken various major initiatives
subsequent to the April 2009 announcement that involve extensive

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GAO-10-787 Combating Foreclosure Rescue Schemes

collaboration with state agencies, which they believe added momentum to
the federal government’s efforts to support law enforcement actions
against these schemes. The subsequent creation of the FFETF appears to
build on the April 2009 announcement by expanding the focus of the
federal government’s coordinated efforts to financial fraud in general,
including mortgage fraud. However, the focus on foreclosure rescue and
loan modification schemes is not as clear as in the April 2009
announcement.
The Mortgage Fraud Working Group has developed an action plan that
identifies the working group’s primary purpose as increasing enforcement
in the area of mortgage fraud. The action plan also, in part, addresses two
of the key factors that we identified as important to federal efforts in
combating foreclosure rescue and loan modification schemes—educating
consumers about deceptive practices and effectively coordinating law
enforcement efforts to combat these schemes. Consumer education is a
key factor in combating these schemes, since law enforcement agency
officials indicated that it is easier to stop a crime from taking place than it
is to catch the criminal later and obtain restitution. Greater coordination
in the area of mortgage fraud is also particularly important given the wide
array of federal, state, and local agencies involved, as well as nonprofit
partners. However, the action plan does not address key practices that can
help enhance and sustain collaboration among federal agencies, such as
the need for a clear, long-term strategy; clear delineation of roles and
responsibilities; and results-oriented performance measures. Without an
action plan that identifies roles and responsibilities and key metrics, the
working group may not be able to optimize the efforts of its members to
combat mortgage fraud through enhanced coordination of federal, state,
and local agencies. In addition, the working group’s action plan does not
specify strategies for foreclosure rescue and loan modification schemes,
and the distinctive nature of these schemes suggests that they warrant a
specific approach, particularly in identifying ways for supporting statelevel law enforcement efforts. By developing a strategy that clearly
delineates short- and long-term strategic goals, differentiates between
types of mortgage fraud, and includes accompanying performance
measures, the Mortgage Fraud Working Group could enhance its ability to
contribute to law enforcement efforts to combat foreclosure rescue
schemes and other types of mortgage fraud.

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GAO-10-787 Combating Foreclosure Rescue Schemes

Recommendations for
Executive Action

To develop a comprehensive strategy for the FFETF’s Mortgage Fraud
Working Group’s efforts to combat mortgage fraud, we recommend that
the U.S. Attorney General, as the head of the FFETF, do the following:
(1) develop clear, long-term strategies and performance measures that the
working group can use to evaluate its progress toward achieving its longterm goal of increasing enforcement in the area of mortgage fraud and
(2) to the extent that the working group considers foreclosure rescue
schemes to be a priority, develop strategies specific to these schemes,
including those that enhance coordination of law enforcement agencies
and that provide consumer education.

Agency Comments
and Our Evaluation

We provided a draft of this report for review and comment to the heads of
the Departments of Housing, Justice, and the Treasury and the Federal
Trade Commission. We received written comments from the Department
of Justice. These comments are summarized below and reprinted in
appendix II. DOJ, FTC, HUD, and on behalf of Treasury, the Financial
Crimes Enforcement Network and the Office of the Comptroller of the
Currency, provided technical comments, which we incorporated in this
report, where appropriate.
In its written comments, DOJ concurred with our recommendations that
the FFETF develop clear, long-term strategies and performance measures
to evaluate its progress in increasing enforcement in the area of mortgage
fraud and consider developing strategies specific to foreclosure rescue
schemes. DOJ stated that it agreed that incorporating additional long-term
strategies and metrics, as feasible, into its action plan, as we
recommended, could enhance and sustain the progress to date of the
Mortgage Fraud Working Group’s efforts to improve federal, state, and
local law enforcement agencies’ abilities to coordinate and adapt to the
everchanging schemes. DOJ also stated that it would provide a detailed
plan of action in its response to Congress.

As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
date of this letter. At that time, we will send copies of this report to other
interested congressional committees, the Attorney General of the United
States, the Secretary of the Department of Housing and Urban
Development, the Secretary of the Treasury, the Chairman of the Federal
Trade Commission, and other interested parties. The report also will be
available at no charge on GAO’s Web site at http://www.gao.gov.

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GAO-10-787 Combating Foreclosure Rescue Schemes

If you or your staffs have any questions about this report, please contact
me at (202) 512-8678 or sciremj@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs are on the last page of this
report. GAO staff who made major contributions to this report are listed in
appendix III.

Mathew J. Scirè
Director, Financial Markets
and Community Investment

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GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix I: Objectives, Scope, and
Methodology

Appendix I: Objectives, Scope, and
Methodology
To determine what is known about the nature and prevalence of mortgage
foreclosure rescue and loan modification schemes, we collected available
data from and interviewed representatives of the four federal agencies—
the Federal Trade Commission (FTC) and the Departments of Justice
(DOJ), the Treasury (Treasury), and Housing and Urban Development
(HUD)—and their relevant bureaus or divisions that were identified as
members of a multiagency initiative to combat these schemes as
announced by the administration on April 6, 2009. Within DOJ, we
interviewed officials from the Executive Office for U.S. Attorneys, the
Federal Bureau of Investigation (FBI), Criminal Division, Civil Rights
Division, and Office of Justice Programs. In addition, we analyzed
information related to the enforcement actions that FTC brought in
calendar years 2008 and 2009 against individuals engaged in foreclosure
rescue and loan modification schemes. Furthermore, we contacted
national nonprofit organizations that collect consumer information or
have conducted studies related to foreclosure rescue and loan
modification schemes. These organizations include NeighborWorks
America®, the Lawyers’ Committee for Civil Rights Under Law (Lawyers’
Committee), the Homeownership Preservation Foundation, the National
Community Reinvestment Coalition, and the Council of Better Business
Bureaus. We also contacted other nonprofit organizations knowledgeable
about these schemes, including the Consumers Union and the Hope Now
Alliance. We interviewed representatives of these national nonprofit
organizations, which allowed us to obtain additional information on the
nature of the schemes, as well as the likely persons engaged in and
potential victims of these schemes. Several of these organizations also
provided us with information about the number of potential victims,
although we determined the information could not be used for the purpose
of estimating the prevalence of these schemes. This information included
the number of people who reported that they may have been victimized to
the Homeownership Preservation Foundation’s Homeowner’s HOPE™
Hotline (1-888-995-HOPE), and the number of people who had complaints
about possible scams reported by the Lawyer’s Committee. 1 Lastly, we
obtained information on the characteristics of potential schemes from a
study published by the National Community Reinvestment Coalition. 2

1

A large number of complaints reported by the Lawyers’ Committee were ones they had
received from the Homeownership Preservation Foundation.
2

National Community Reinvestment Coalition, Foreclosure Rescue Scams: A Nightmare
Complicating the American Dream (Washington, D.C.: March 2010).

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Appendix I: Objectives, Scope, and
Methodology

To obtain additional information on the nature of these schemes, including
descriptions of persons likely to engage in them and potential victims, we
collected information specific to five states—Arizona, California, Florida,
Illinois, and New York. We selected these five states because they featured
some of the highest numbers of potential foreclosures, calculated using
Mortgage Bankers Association’s fourth quarter 2009 information on the
total loans past due by state, and we also considered geographic
dispersion. 3 In each state, we conducted structured interviews with
representatives of the State Attorney General’s office, a U.S. Attorney’s
office, and one other agency or nonprofit organization in each state who
was knowledgeable about these schemes. 4 In the absence of information
that could reliably be used to assess the prevalence of these schemes, we
asked state officials to provide us with information on the indicators that
they typically use to assess the likely prevalence of a consumer problem in
their states, such as the number of consumer complaints, enforcement
actions, or investigations. We also asked state officials to provide us with
information on the state laws and regulations that they use to take actions
against persons who engage in these schemes.
To obtain information on the activities of the Financial Fraud
Enforcement Task Force (FFETF), we interviewed a Deputy Attorney
General within DOJ and the Executive Director of the FFETF. To obtain
information about the FFETF’s specific activities related to combating
foreclosure rescue and loan modification schemes, we interviewed the
federal and state agency cochairs of the FFETF’s Mortgage Fraud Working
Group, which includes representatives of DOJ’s Civil Justice Division, the
U.S. Attorneys’ Offices, FBI, HUD’s Office of Inspector General, and the
National Association of Attorneys General (state representative). We also
interviewed select members of the Mortgage Fraud Working Group—FTC,
Treasury’s Financial Crimes Enforcement Network (FinCEN), and the
U.S. Postal Inspection Service—we selected on the basis of their roles in
combating foreclosure rescue and loan modification schemes and
recommendations from the working group’s cochairs. In addition, to
understand how the FFETF and the working group functioned, we

3

The Mortgage Bankers Association’s National Delinquency Survey contains data on
delinquencies and foreclosures for the fourth quarter of 2009.
4

The U.S. Attorneys that we interviewed represented the following districts: the District of
Arizona, the Eastern District of California, the Southern District of Florida, the Northern
District of Illinois, and the Eastern District of New York. With the exception of Arizona,
each state has more than one U.S. Attorney district.

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GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix I: Objectives, Scope, and
Methodology

obtained and reviewed (1) the executive order establishing the FFETF’s
mission and key functions and meeting agendas; (2) perspectives from the
working group’s cochairs and previously listed members; and (3) available
documentation on the working group’s activities related to these schemes
as identified by members (e.g., training, mortgage fraud summits, and
meetings). We also attended the public session of the FFETF’s Mortgage
Fraud Summit in Detroit, Michigan, on April 23, 2010, to determine the
extent to which these summits addressed the problem of foreclosure
rescue and loan modification schemes. To obtain information about other
federal efforts to combat these schemes, we interviewed the federal
agencies and state representatives that announced efforts to combat these
schemes on April 6, 2009—including FTC, DOJ, Treasury’s FinCEN, and
HUD—and collected documentation on their activities.
We also interviewed state officials involved in the April 2009
announcement, including State Attorney General representatives who
participated in the press announcement and the DOJ working groups that
were formed following this announced effort. To identify other major
efforts related to combating these schemes, we interviewed federal, state,
private, and nonprofit officials, such as those involved in the Loan
Modification Scam Prevention Network (the Network), primarily two
government sponsored enterprises—Fannie Mae and Freddie Mac—and
two national nonprofit organizations—the Lawyers’ Committee and
NeighborWorks America, about national efforts to combat these schemes.
We collected and reviewed descriptive information on what the Network
described as its key efforts—primarily the media consumer education
campaign run by NeighborWorks America and an effort by the Lawyers’
Committee to collect consumer complaint information from victims of
foreclosure rescue and loan modification schemes. We also reviewed
additional individual consumer education activities that the federal, state,
and nonprofit agencies we have previously mentioned described using
publicly available information.
To identify what factors may affect federal efforts’ likelihood of success in
combating foreclosure rescue and loan modification schemes, we analyzed
information provided by the representatives of the federal and state
agencies and national nonprofit organizations that we interviewed
throughout the course of our review. This information largely pertained to
what these representatives identified as the challenges to combating these
schemes but also included information on factors that they identified as
important in combating these schemes, such as the nature of law
enforcement coordination. In addition, to assess how factors related to
strategic planning could affect the federal effort’s likelihood of success,

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GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix I: Objectives, Scope, and
Methodology

we considered our October 2005 report on practices that can help enhance
and sustain collaboration among federal agencies when assessing how the
FFETF’s current planning practices could affect collaboration among its
many federal agencies and other partners, such as state and nonprofit
agencies. 5
We conducted this performance audit from September 2009 to July 2010 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.

5

GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain
Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005).

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GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix II: Comments from the Department
of Justice

Appendix II: Comments from the Department
of Justice

Page 36

GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix II: Comments from the Department
of Justice

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GAO-10-787 Combating Foreclosure Rescue Schemes

Appendix III: GAO Contact and Staff
Acknowledgments

Appendix III: GAO Contact and Staff
Acknowledgments
GAO Contact

Mathew J. Scirè, (202) 512-8678 or sciremj@gao.gov

Staff
Acknowledgments

In addition to the contact above, Harry Medina (Assistant Director),
Meghana Acharya, Sonja J. Bensen, Kristy Brown, Elizabeth H. Curda,
Melissa F. Kornblau, Otis S. Martin, Marc Molino, Linda Rego, Jennifer W.
Schwartz, Andrew Stavisky, James D. Vitarello, and Heneng Yu made key
contributions to this report.

(250497)

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