Las Vegas NowInvestigators Focus on Mortgage Fraud Schemes

Investigators Focus on Mortgage Fraud Schemes

Across the country, hard working Americans are pouring money into homes that are worth just a fraction of what they paid.

Nationwide, 23-percent of homeowners are upside down. The problem is the worst in Nevada where 65-percent of mortgages are underwater.

With that struggle comes desperation as homeowners to fall victim to mortgage fraud schemes.

Las Vegas has led the nation in foreclosures for 34 months in a row and scam artists hope to hit desperate homeowners before they reach that point. Now state leaders are taking action to stop criminals from preying on vulnerable homeowners looking for help.

John Kelleher heads up the Mortgage Fraud Task Force for the Nevada Attorney General's Office. He and the prosecutors are overwhelmed by the amount of loan modification companies taking advantage of homeowners struggling to hold on.

“About 90 to 95-percent of what we are doing right now is focusing on the mortgage fraud and loan modifications scams,” he said.

His boss, Attorney General Catherine Cortez Masto, turned to the federal government for help in combating the flood of scammers trying to take advantage of the Las Vegas housing crisis. “The complexity of these cases have astounded me. It's not just one person setting up shop saying, ‘I am a loan modification person and scamming people,’ it is a complex network of sham businesses, sham web sites,” she said.

Flanked by Nevada Senator Harry Reid, Federal Trade Commission Chairman Jon Leibowitz and an Assistant U.S. Attorney, Masto hopes to send a message to the loan modification bad guys. “We will find you and we will prosecute you,” she said.

Masto says those companies pray on homeowners before foreclosure. In southern Nevada alone, 154 companies have complaints against them with an estimated 31,000 victims.

In the desperation to save their homes from foreclosure, Leibowitz says outrageous claims sound very appealing to homeowners. “When someone says to you, ‘give us your money in advance,’ that is a problem. When they guarantee success, that is a problem. When they say, ‘pay us and don't pay your mortgage company,’ that is another problem. They are all red flags,” he said.

He thinks with more education the scams will dry up.

Kelleher will add the teeth just to make sure scammers get it. “We are doing criminal prosecutions. We are seeking grand jury indictments. We will be seeking jail time,” he said.

State and federal officials hope to get the message out. The FTC announced they will also pass a set of new rules in 30 days for loan modification companies. First on the list is to ban the excessive up front fees scammers ask for.