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Financial Fraud Involving Seniors Arises From Country’s Mortgage Crisis
Spectrum Staff
Last
week, U.S. Senate Special Committee on Aging Chairman Herb Kohl (D-Wis.)
held a hearing on the rise of financial scams across the country,
the result of a sharp increase in foreclosures.
Across the nation, foreclosures have increased by 95 percent in the past year.
Foreclosure rescue scams target low-income and senior homeowners already facing
financial difficulties.
Often these financial predators will claim they can help “save” the
home of a senior experiencing foreclosure when, in fact, they plan to walk away
with both the title and equity of the home. The hearing will review how the rescue
scams work, who they impact and what the government can do to eliminate the scams.
“The mortgage foreclosure crisis is real. Most communities across the country
are experiencing both the primary and secondary effects,” said Chairman
Kohl. “We need to determine how federal and state governments can best
protect seniors and other targeted populations from these ruthless financial
predators.”
Because foreclosure filings are public information, scammers target the already
troubled homeowners, contacting them by phone or mail repeatedly with claims
that they can help the homeowners remain in their residence.
Often these financial predators lead the homeowner to believe that there are
no other options and advise them not to contact their lender or seek legal advice.
In the end, these predators walk away with both the title and equity of the home.
Senior homeowners are particularly vulnerable to rescue scams because many of
them are on fixed incomes and rely on the equity in their homes as their primary
financial asset.
Seniors are also particularly attractive to financial predators because they
tend to have a larger amount of equity in their homes. Additionally, older homeowners
are also more likely to experience foreclosure in the first place because, according
to a study conducted by AARP, they are more likely to have subprime mortgage
loans than younger borrowers.
The foreclosure rate for sub-prime loans is much higher than prime loans because
they carry a much higher risk of default by the borrower.
Chairman Kohl announced that he would soon introduce legislation to help homeowners
across the country avoid these foreclosure rescue scams, especially in states
where no law exists to prohibit or regulate these practices.
Kohl also acknowledged the plan recently announced jointly by the mortgage industry
and administration to help seriously delinquent borrowers stay in their homes.
“While this is a step in the right direction,” Kohl said, “there
are concerns that this help will not reach as many troubled homeowners as possible.”
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