Treasury Gives Banks Guidance on Loan Modification/Foreclosure Rescue Scams

The Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) has issued what they refer to as “guidance” to financial institutions related to the practice of using Suspicious Activity Reports (“SARs”) to report loan modification and foreclosure rescue scams.

The guidance talked about “an increasing amount of fraud relating to loan modification and foreclosure rescue scams,” and stated that “unscrupulous persons and companies are targeting homeowners having difficulty in paying their mortgages”.

The guidance also stated that the president’s Home Affordable Refinance Program and the Home Affordable Modification Program may create “an opportunity for abuse by unscrupulous persons or companies”. The advisory FinCEN sent out explained that financial institutions may interact with loan modification and foreclosure rescue scams in two ways:

  1. Persons or entities perpetrating scams may use the services of a financial institution to receive, deposit or transfer funds related to such scams.
  2. Financial institutions may interact with customers who are victims of loan modification or foreclosure rescue scams.

A list of “red flags” was also provided to help financial institutions identify loan modification and foreclosure rescue scams. Among others, these red flags included a homeowner stating:

A, That he or she has been making payments to a party other than the mortgage holder or servicer.

B. That he or she has hired a third party to help avoid foreclosure or help renegotiate the terms of his or her mortgage.

C. That a third party company used aggressive tactics to seek out the homeowner.

D. That he or she paid someone to assist in obtaining help from the correct federal affordable housing program.

E. That he or she has been advised that there is no need to pay a mortgage because the contract is invalid.

The FinCEN advisory instructed financial institutions that become aware of potentially fraudulent activities related to loan modification or foreclosure rescue scams to include the term “foreclosure rescue scam” in the narrative portions of all relevant SARs filed with Treasury.

FinCEN also requested that financial institutions include all information available for each party suspected of fraudulent activity when completing the Suspect/Subject Information Section of SARs. However, the advisory did clarify that since the homeowner is often the victim of the scam, he or she should not be listed as a suspect.

So… as long as you’re not “a third party that has been hired to help avoid foreclosure or help renegotiate the terms of a mortgage” you should be fine.

Whew… really dodged a bullet there, don’t you think? See… and you were worried. There’s nothing to worry about… absolutely nothing.

It’s only the Financial Crimes Enforcement Network, which is the enforcement arm of the United States Treasury Department. I’m sure being a “law firm” will protect you from having any problems whatsoever. Treasury would never dare screw around with a law firm…

Okay, so it looks like my work here is done… Maybe I should start writing about something else… Appraisals… I hear there’s some new problems with appraisals…

Ergo Bibamus!

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