Why do homeowners fall for these scams?Tripoli blames the failure of lenders to adequately spell out the foreclosure terms, time frame and owners' rights, and the hesitancy of homeowners facing foreclosure to talk about it. That silence you hear is the deafening silence of shame.
"The consumer makes rushed judgments that are not good judgments. They get entangled in this and they think that what happened to them is just the way it works," he says. "Americans have the really admirable quality that they want to take responsibility for their own lives. They are too willing to take too much responsibility at times and take too much of the blame."
Desperation born of the housing crisis can also make homeowners easy targets for fraud. Dana Simas, a spokeswoman for the California Department of Justice, says several high-profile fraud cases have centered around promises to modify mortgages for behind-the-eightball homeowners. One such case, involving fraudulent 'counseling service' First Gov, is typical.
"They took people's money, they said that they would talk to their lender and modify their loan and get them lower interest rates, lower payments -- the works," says Simas. "They charged an upfront fee, usually ranging about $1500 to $3000, and they told the victim, 'Don't talk to your lender, don't contact your lender, because it will interfere with our renegotiation process.'"
"Obviously, they were just pocketing the money and weren't providing any services."
Unfortunately, help for victims caught up in foreclosure-related fraud is becoming harder to find. Even if someone in foreclosure could afford to hire an attorney, fewer and fewer lawyers are inclined to take cases against scammers because the prospect of ever collecting a court award is extremely slim.
In his former position as staff attorney for Clark County Legal Services in Las Vegas, Daniel Ebihara, now a deputy attorney general with the state of Nevada, helped foreclosure victims through a network of real estate attorneys who volunteered their time to help. One of his success stories involved winning a trial on behalf of a young couple who thought they had sold their home to fend off foreclosure, until they went to buy a car and found that the 30-year mortgage was still theirs.
Sometimes scammers are far from strangers.
"This doesn't just happen with rescue companies," Ebihara says. "We also see the elderly being taken advantage of by their own children, where they come in and say, 'We'll help you out. Just put us on the mortgage and we'll take care of you for the rest of your life.' As soon as the papers are signed, the kids are kicking their own parents out on the street. It's horrible."
With fewer places to turn, more homeowners are falling prey to the wolves that are literally at their door.
Tripoli says,"When you marry deregulation and the erosion of consumer protection to what's going on with consumer debt today, when you put consumers in this crunch and then you strip all their protection, you get a perfect storm. It's not a huge, huge number of Americans, it's not a majority, but it's a much bigger number than we've seen in the past."