As HARP 2.0 Heats Up, Beware of Fraud

Con artists are likely to prey on vulnerable homeowners, the FBI says.

By + More

If you're a stressed-out homeowner facing delinquency notices, foreclosure, and eviction, you might be looking for someone or something to make it all go away.

Scamsters are only too happy to oblige and are increasingly preying on vulnerable homeowners, the Federal Bureau of Investigation says, defrauding thousands of Americans and bilking consumers of millions of dollars.

"We call them home rescue schemes," says Tim Gallagher, chief of the FBI's Financial Crimes section. "The targeting right now by the bad actors out there, we're seeing an upswing in directing it at individuals who are underwater."

[Read: Down Payments: What Are Buyers Really Paying?]

Con artists most commonly go after underwater homeowners having trouble refinancing, promising to help for an advance payment of $3,000 to $5,000. After receiving the payment, the fake business closes up shop and disappears.

Homeowner rescue schemes and refinancing-related scams account for 10 percent of the FBI's mortgage fraud cases, according to Gallagher.

That number would be higher, he says, but the bureau has a $1 million threshold when it comes to the amount of money involved in a particular scheme. It's easier to arrive at that amount with someone accused of mortgage loan origination fraud on four or five houses, Gallagher says, than it is for homeowner bailout schemes, which tend to involve lower dollar amounts.

"It's still a priority of ours," Gallagher says. "These individuals are operating as companies that move from state to state, and we're compiling data and in putting the schemes and numerous victims together we're able to arrive at a figure prosecutable at the federal level."

[Read: Could Real Estate Investors Ruin America's Communities?]

As the government refinancing program HARP 2.0 gears up, the FBI is working closely with the Department of Housing and Urban Development and the Federal Trade Commission to increase awareness about these scams and help prevent consumers from becoming victims in the first place.

"We anticipate there to be even more reports of fraud in these schemes and we've made it a priority to prosecute these cases," Gallagher says. "Even though the dollar values might not add up to some of the loan origination schemes, we have made them a priority."

mhandley@usnews.com

Twitter: @mmhandley

  • President Obama Still on Top With Homeowners
  • Occupy Movement Taunts Law in Home Takeovers.
  • No Housing Plan From Newt.