Remarks By Treasury Secretary Timothy Geithner And Attorney General Eric Holder

Also Present: Secretary Of Housing And Urban Development Shaun Donovan; Jon Leibowitz, Chairman, Federal Trade Commission; Lisa Madigan, Illinois Attorney General;

Subject: Combating Mortgage Modification And Foreclosure Rescue Fraud

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SEC. GEITHNER: Nice to see you all. Thanks for coming.

On February 18th, the president announced a series of initiatives to address the housing crisis and help American homeowners. These programs were designed to keep mortgage interest rates low; to allow homeowners to refinance; and to help families lower their monthly mortgage payments, stay in their homes.

Alongside actions with the Federal Reserve, mortgage interest rates in the United States now are at historic lows. But just as this administration has intensified our efforts to help American homeowners, those who would seek to prey on the most vulnerable are intensifying their tactics as well, often through purported mortgage modification and foreclosure relief companies. These are predatory schemes designed to rob Americans of their savings, and potentially their homes.

Today, we are announcing a major interagency effort to combat foreclosure rescue scams. I'm very pleased to be joined here today by Attorney General Eric Holder; the Secretary of Housing and Urban Development, Shaun Donovan; Federal Trade Commission Chairman Jon Leibowitz; and Lisa Madigan, the Illinois attorney general. Their presence here today underscores our deep commitment to protect American consumers and borrowers and to cooperate closely at both the federal and state level.

Now, contributing to these joint efforts, Treasury is announcing two initiatives today. First, Treasury's Financial Crimes Enforcement Network, known as FinCEN, is issuing an advisory to help financial institutions spot questionable loan modification schemes and report that information for law enforcement purposes.

The advisory provides red flags for financial institutions to help better identify a loan-modification or foreclosure scam.

Second, we're announcing a targeted effort, coordinated by FinCEN, to deter fraudulent activity and combat these fraudulent loan- modification schemes. FinCEN, working with our partners from the law- enforcement and regulatory communities, will utilize information provided by the financial industry, alongside -- with other information supplied by the agencies involved, to identify fraud suspects for civil and criminal investigation.

FinCEN will also help law-enforcement agencies streamline and coordinate their efforts so that the resources of multiple investigative and prosecutorial agencies are focused in the most efficient way. I'd like to thank Jim Freis and his team at FinCEN for taking the lead in this effort.

What today's announcement means for the American homeowner is this: We will shut down fraudulent companies more quickly than before.

We will target companies that otherwise would have gone unnoticed under the radar. And we will aggressively pursue individuals involved in mortgage rescue scams.

Now, to the homeowners taking part in our new loan modifications scheme, a few important messages: Know that free help is available through nonprofits and government agencies in your communities. You can go online and seek them out. Be cautious of anyone or any organization that claims to guarantee success or seeks to charge up- front fees for services related to these programs. Those are red flags not to be ignored.

And if you have questions about how our plan works, go to makinghomeaffordable.gov. This website is a great resource to help better understand the help that the administration's putting in place.

Now let me just close by saying that one of the lessons of this financial crisis is that failures in consumer protection cause enormous damage, not just to American families but to the stability of the financial system. Aggressive action at the earliest stage will make it more difficult for bad actors to engage in fraudulent activity, and it'll help restore confidence in the basic fabric of our financial system.

I'm very pleased to acknowledge the efforts of Neil Barofsky, who's here today. The -- he's the special inspector general for the Troubled Asset Relief Program. He's here today, and he has been actively working with the Office of Financial Stability at the Treasury to build fraud protections into our programs, including in the Making Home Affordable program.

Mr. Barofsky has a history of successful mortgage-fraud prosecutions, and we benefit greatly from his knowledge and experience. Just as one example, we've adopted his recommendation that every modification package comes with very clear warnings against fraud and a reference to the special IG's fraud hotline. I know his office stands ready to receive any referrals concerning fraud in the TARP programs generated by this initiative.

Now, American homeowners have been through enough over the past two years. They face enormous challenges still. The last thing they need now is to be taken advantage of as they try to hold onto their homes. And today's announcement underscores that this administration is doing everything we can. We will do everything we can to prevent that from happening.

I'd like to now turn it over to Attorney General Holder, and he's going to be followed by Chairman Leibowitz, by Illinois Attorney General Madigan and Secretary Donovan. Thank you.

Eric?

ATTY GEN. HOLDER: Thanks, Tim. Good morning.

For millions of Americans, the dream of homeownership has become a nightmare. The unscrupulous actions of individuals and companies to exploit the misfortune of others is despicable, it's immoral, and it's also illegal.

The FBI is investigating more than 2,100 mortgage fraud cases. That's up 400 percent from five years ago. The bureau has more than doubled the number of agents who are investigating mortgage scams, has created a National Mortgage Fraud Team headquartered here in Washington, D.C., and is working hand in hand with our partners at other agencies.

Within just the past few months, the department has obtained important convictions against perpetrators of rescue schemes. We convicted defendants in Kansas who solicit homeowners going through foreclosure; told them that for a fee, they could help them keep their homes and then filed fraudulent bankruptcy petitions on their behalf.

We convicted individuals who targeted homeowners in Brooklyn and the Bronx for a rescue scheme. The defendants induced homeowners to sell their homes to straw buyers on the false promise that they would get them back after they were saved from foreclosure. The distressed homeowners lost the title to their homes, faced eviction, and the lenders suffered losses from the defaulted loans.

We are working with the FTC to reinvigorate the Executive Working Group, which brings together the Justice Department, the FTC and state attorneys general to coordinate and exchange intelligence on competition and consumer fraud issues, such as these rescue scams that we are addressing today.

We look forward to working with Treasury and HUD and all of our state partners to share intelligence so that we can target each of these new schemes as they arise and hold those who prey on vulnerable homeowners accountable.

I also want to make sure that people understand that we are committed to ensuring that homeowners who may be having difficulty in making their mortgage payments do not experience discrimination and can benefit in equal measure from legitimate loan modification programs and other federal programs to provide mortgage assistance and to stabilize home prices.

Already, we are hearing increasing concerns that not all distressed homeowners are receiving the same kinds of opportunities for loan modifications. We are also hearing that the terms and fees for such modifications are not being made available on a non- discriminatory basis. Lending discrimination prevents those who are discriminated against from enjoying the benefits of access to credit, including reasonable mortgage payments so that they can stay in their homes and provide much-needed stability in their neighborhoods.

Now, let me be absolutely clear. Discrimination in lending on the basis of race, national origin or other prohibited factors is destructive, it's morally repugnant, and it is against the law. And we -- I mean all of us -- will use the full range of our enforcement authority to investigate and prosecute this type of unacceptable lending discrimination.

To sum up, I'd like to speak directly to those individuals and to those companies whose illegal and repulsive practices have harmed far too many Americans. And the message is very simple: If you prey on vulnerable homeowners with fraudulent mortgage schemes or discriminate against borrowers, we'll find you and we will punish you.

I'd now like to introduce the FTC chair, Jon Liebowitz.

MR. LIEBOWITZ: Thank you, Mr. Attorney General.

As you know, the Federal Trade Commission is our nation's consumer protection agency, and we are pleased to be part of this broad effort to help distressed families stay in their homes. Here's what the FTC is doing.

First, we're cracking down on the bottom-feeders of the foreclosure crisis that are victimizing homeowners.

Second, we're warning other companies that, unless they change their ways, we are going to go after them too. And finally, we're telling homeowners in distress, in dire circumstances, how they can get help.

First, today the FTC is announcing five new cases against companies that promised mortgage relief or foreclosure-rescue services but did little or nothing to actually allow folks to stay in their homes. These companies are kicking people when they're down, charging enormous up-front fees and sabotaging efforts by homeowners who could be getting help for free.

In four of these cases, we charged the defendants with using copycat names and logos to trick homeowners into believing that they were working with the government or with the HOPE NOW alliance, a nonprofit group that actually does offer free assistance. These companies gave people false hope. They're as shameless as they are opportunistic.

At our request, the courts have issued emergency orders stopping the four schemes. And today we're asking the court to stop another company that calls itself Federal Loan Modification but has no affiliation with the federal government. They have been preying on homeowners, and we're going to try to stop them. And, much to my dismay, I actually heard an advertisement for them on WTOP last week.

Let me thank the attorneys general of California, Idaho, New Jersey, and especially my friend General Madigan of Illinois for their help on these cases. We plan to work more closely with our state AG counterparts in the coming months, and we are delighted -- we are delighted that Attorney General Holder has agreed to resurrect the executive working group, which had gone into atrophy in recent years. We're also getting lots of assistance, by the way, from FinCEN -- thank you so much.

Second, on Friday, we sent warning letters to 71 additional companies that appear to be marketing deceptive loan modification or foreclosure-assistance programs. These companies claim, "We will stop your foreclosure," or "We will save your home," or "We have a 97- percent success rate," or "We guarantee to reduce your payments." But if you pay them instead of your mortgage company, you will find yourself on the fast track from distress to disaster. Now these companies are on notice: If you don't clean up your act, you are next.

Third, we're reaching out directly to distressed homeowners to warn them about foreclosure rescue fraud. Several national loan servicers, including Chase Home Finance, Sun Trust and GMAC, have agreed to distribute this flyer, a note to homeowners, to at-risk homeowners in monthly statements, in one-on-one counseling sessions, and on their websites. And we're encouraging others to follow their lead, and I think many others will. The flyer is available in English and in Spanish.

Finally, let me talk to distressed homeowners, those in dire circumstances, directly. If you're worried about losing your home to foreclosure, here's what you should do. To begin, grab your monthly statement and call your mortgage company. The sooner you reach out to them, the more likely you'll be able to work out a payment plan.

Next, get free help from a HUD-certified counseling agency 24 hours a day, seven days a week. And I'm sure Secretary Donovan will talk more about this.

And if you hear a pitch coming from a company that guarantees it will save your home, asks you to pay fees before they'll help you, or tells you to stop paying your lender, especially if it comes in combination, please, just say no, and report it to the FTC. Your efforts will help us help other homeowners just like you.

And now I'm pleased to introduce Attorney General Madigan, who has been really a leader in this area.

MS. MADIGAN: Thank you, Mr. Chairman.

With millions of Americans facing foreclosure, it is imperative that state and federal authorities coordinate their efforts to protect desperate homeowners from mortgage rescue fraud. And that is why we have all gathered here today with a very simple message: If you are struggling to make a your mortgage payment or if you are facing foreclosure, stay away from anyone who says that they will save your home for money up front.

Whether they call themselves foreclosure rescuers or mortgage consultants, these operations are almost always scams. In most cases, you will receive no help at all. They will promise to stop your foreclosure. They will promise to save your home. They will promise to reach to to your lender.

They will promise to get a loan modification for you. They will promise to represent you in court. They don't. They don't stop the foreclosure, they don't save your home, they don't reach out to your lender, they don't get you a modification, and they don't show up in court.

All that they do is take your money, and you lose not just your money but you lose valuable time that you could have been using to reach out for free legitimate help.

Please know that paying money upfront for mortgage rescue services is a clear sign of a rip-off, and it is also illegal in most states.

In 2006 I am proud to say that Illinois was one of the first states in the country, along with Maryland and Minnesota, to pass a law banning foreclosure consultants from charging upfront fees. In Illinois the law actually prevents these consultants from accepting any money until they have fully performed all of the services as they promised. To date, 22 states and the District of Columbia have enacted laws or rules regulating foreclosure consultants. But passing tougher laws is just one of the things that we have been doing at the state level to lead the effort to help homeowners avoid foreclosure fraud.

We've also been very active in bringing enforcement actions against these scam artists, and today I am filing two more lawsuits against these predators who are going after people in the Chicago area on Spanish language radio.

That will bring to total 24 lawsuits that we have brought since 2006. I'm proud to say also that we have received $1.8 million in restitution so far for troubled homeowners.

Additionally, my office has sent warning letters to 70 companies that are operating in violation of Illinois law. We are demanding that these companies pay back harmed homeowners and if they fail to do so, we will sue them.

Across the county states have brought more than 150 enforcement actions against mortgage rescue operations. And in addition to the enforcement actions by state attorneys general, state financial regulators are also taking aggressive action.

And now, as evidenced by the departments and agencies coming together today, the state and federal governments are sharing information and resources.

So, those who are engaged in mortgage rescue scams should know: It's not a question of if we'll come after you; it's only a question of when.

If you are struggling to make your mortgage payment, if you are facing foreclosure, please, contact your state attorney general, contact the FTC, contact HUD immediately. There is free legitimate help available for you to save your home.

And now it is my pleasure to introduce and bring to the podium the HUD secretary, Mr. Donovan.

SEC. DONOVAN: It's an honor to join my partners from the Federal Trade Commission and the Department of Treasury, along with Attorney General Madigan, to give the American people the real facts about foreclosure scams.

Foreclosure scams are destructive, deceptive and devastating to families who are fighting to survive. We have families on the edge of foreclosure that are being offered things that are too good to be true. And we at HUD, in coordination with my colleagues here today, will make sure -- will take every measure we can to educate and protect consumers and homeowners, bringing these scams to light, and work to prevent con artists from exploiting the housing crisis.

There are legitimate people, places and agencies that American families can turn to when they are facing foreclosure, and I'll detail those today. But I can't stress enough that there is no fee to access the president's Making Home Affordable plan. For the homeowners fighting hard to make their mortgage payments and stay in their homes, our housing plan, the Making Home Affordable plan, will help up to 9 million Americans. Making Home Affordable will work in concert with the president's recovery act and support a recovery in the broader housing market.

Our plan is helping families in three ways. First, we are protecting housing opportunities for all Americans by taking action administration-wide to reduce interest rates, which are now at historic lows.

Second, we will assist 4 (million) to 5 million homeowners who wouldn't otherwise be able to take advantage of today's historically low mortgage rates to refinance and lower their housing payment.

Lastly, we have committed up to $75 billion to help an additional 3 (million) to 4 million homeowners who are at risk of foreclosure modify their unaffordable mortgages into affordable ones.

These three planks of our housing plan will keep American families in their homes, and prevent the falling home prices that result from nearby foreclosures.

As I said before, with President Obama's plan a homeowner never has to pay to participate in the program. I encourage anyone trying to modify or refinance their loans to a monthly mortgage payment that is affordable to visit the Making Home Affordable website at MakingHomeAffordable.gov. If you wish to obtain counseling assistance from a local HUD-approved counselor, HUD urges you to visit MakingHomeAffordable.gov as well for more information. You can also call the Homeowners HOPE Hotline at 1-888-995-HOPE -- that's 1-888- 995-HOPE -- for free foreclosure assistance.

Once again, participating in President Obama's Making Home Affordable Plan is free of charge, and either your servicer or one of the 2,600 HUD-approved mortgage counselors around the country can help you take advantage of the plan. All of this information is included on literature we will be distributing today nationwide to all of our housing partners -- our HUD field offices and staff, housing authorities, state and local housing agencies and non-profit organizations. This and other targeted outreach efforts will help reach out directly to communities hard hit by foreclosure about the legitimate foreclosure assistance available to them.

We are also working to enhance FHA's detection of fraud by borrowers, lenders and appraisers. These efforts tie in directly to the Obama administration's multi-agency Combatting Mortgage Fraud Initiative in the 2010 budget. Under this initiative, HUD and FHA will be playing a central role by investing in bringing anti-fraud systems online. This initiative will also include additional resources for the FBI and the Justice Department to investigate and prosecute mortgage fraud.

The president's 2010 budget also provides a significant increase in funds to combat mortgage fraud and predatory practices, and includes an historic increase in funding for fair housing enforcement.

These resources will allow HUD to increase enforcement of mortgage and home purchase settlement requirements and will enhance enforcement to create an environment in which home buyers will be served with mortgage terms that are more easily understood and reliably honored by lenders.

April is National Fair Housing Month. It's important, in that context, to recognize that the economic and housing crisis, including foreclosure scams, have disproportionately impacted minority populations across the country. Unscrupulous financial institutions, brokers and others have broken their trust as lenders, cheating and lying to families fighting to make their way through this crisis.

I will renew our commitment at HUD to fair housing enforcement, particularly for enforcement around lending violations that target minority communities.

HUD -- as part of our broader effort to combat abuse and fraud, HUD is using new tools, including the SAFE Act and RESPA, to protect American families. We at HUD, along with our partners here today, will ensure that all Americans, particularly those in areas previously victimized by unscrupulous practices, are protected, and will enforce our laws against those that prey upon them.

Those of us on stage today have a clear message for criminals looking to profit from the housing crisis: We are united in rooting out foreclosure scams. We will do everything possible to ensure that families have the tools they need to take advantage of President Obama's Making Home Affordable plan.

Thank you all for being here today.

END.

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