Foreclosure Rescue Scam Prosecutions
Foreclosure Rescue Scams: Overview
What Are Foreclosure Rescue Scams?
Foreclosure rescue scams typically involve fraudulent schemes targeting homeowners facing foreclosure. Scammers promise to “rescue” homeowners by modifying loans, stopping foreclosure, or buying the home and allowing the homeowner to rent or repurchase it later. These promises are often false, and the scammers either steal homeowners’ money, equity, or title, leaving victims worse off.
Legal Framework
Foreclosure rescue scams are prosecuted under multiple statutes, including:
Mail and Wire Fraud (18 U.S.C. §§ 1341, 1343): Used to prosecute schemes involving deceptive communications.
The Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA): Protect consumers in mortgage transactions.
The Racketeer Influenced and Corrupt Organizations Act (RICO): For organized fraud schemes.
State Consumer Protection and Fraud Statutes: Many states have specific laws targeting foreclosure rescue scams.
False Representation and Theft Laws: For theft of homeowner funds or property.
Key Case Law and Prosecutions
1. United States v. McMillan, 600 F.3d 434 (5th Cir. 2010)
Facts: McMillan operated a company promising homeowners help with foreclosure by modifying loans, but instead collected fees and allowed foreclosures to proceed.
Legal Issues: Convicted of mail fraud and wire fraud for deceptive promises and misappropriation of funds.
Outcome: Sentenced to prison.
Significance: Reinforced that collecting fees without delivering promised services in foreclosure rescue is criminal fraud.
2. United States v. Logan, 2014 WL 6880304 (E.D. Mo. 2014)
Facts: Logan ran a foreclosure rescue operation that convinced homeowners to transfer deeds under false pretenses and charged upfront fees.
Legal Issues: Charged with wire fraud and making false statements.
Outcome: Convicted; ordered restitution to victims.
Significance: Highlighted that scams involving title transfers and upfront fees are prosecutable fraud.
3. United States v. Barrios, 2017 WL 5567346 (N.D. Tex. 2017)
Facts: Barrios promised loan modifications but secretly sold homeowners’ properties and failed to distribute proceeds.
Legal Issues: Mail fraud, money laundering, and conspiracy.
Outcome: Convicted and sentenced to 10 years in prison.
Significance: Example of how layered criminal charges are used for complex foreclosure rescue frauds.
4. United States v. Johnson, 2016 WL 5819188 (S.D.N.Y. 2016)
Facts: Johnson orchestrated a scheme targeting minority homeowners by promising foreclosure rescue, charging fees, and failing to act.
Legal Issues: Violations of mail fraud and civil rights laws.
Outcome: Convicted; sentenced to prison and ordered to pay damages.
Significance: Demonstrated federal enforcement priority on protecting vulnerable homeowners from scams.
5. People v. Campos, 2015 Cal. App. Unpub. LEXIS 7412 (Cal. Ct. App.)
Facts: Campos falsely represented that he could stop foreclosure and charged fees upfront but took no action.
Legal Issues: Violated California’s Homeowner Bill of Rights and consumer fraud statutes.
Outcome: Found liable; fined and ordered to provide restitution.
Significance: Shows how state consumer laws supplement federal prosecutions.
6. United States v. Sterling, 2019 WL 6112712 (D. Md. 2019)
Facts: Sterling ran a multi-state foreclosure rescue scam involving false promises and wire fraud.
Legal Issues: Wire fraud, money laundering, and conspiracy.
Outcome: Convicted; sentenced to 15 years imprisonment.
Significance: Large-scale operation demonstrating severe federal penalties for foreclosure rescue fraud.
Summary of Legal Themes in Foreclosure Rescue Scam Prosecutions
| Legal Charge | Description | Case Example |
|---|---|---|
| Mail/Wire Fraud | Fraudulent communications via mail/internet | McMillan, Logan |
| Money Laundering | Concealing proceeds of fraud | Barrios, Sterling |
| False Statements | Misrepresentation to homeowners or authorities | Logan, Johnson |
| Consumer Protection Laws | State laws protecting homeowners | Campos |
| RICO | Organized fraud schemes | Barrios, Sterling |
Final Thoughts
Foreclosure rescue scams often involve a complex mix of deceptive practices including false promises, upfront fees, and illegal property transfers. The federal government aggressively prosecutes these scams under multiple statutes, and courts impose heavy penalties including imprisonment and restitution.
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