The Strike Force That Never Struck 

Despite pledging to crack down on foreclosure scam artists three years ago, Attorney General Kamala Harris has allowed an industry of fraud to flourish.

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"Between 2010 and 2013, we have filed 172 foreclosure consultant cases in state or federal court," said Jaime Barb, a spokesperson for the Indiana Attorney General's Office. "The vast majority of foreclosure rescue scams are located outside of Indiana," added Barb. California is a "very common" base of operation, he said.

One of the 34 lawsuits filed in 2010 by the Indiana Attorney General's Office against foreclosure consultants was aimed at a California scam operation called Hope4Homes. According to the lawsuit, Hope4Homes operated illegally in Indiana, reaching out to distressed homeowners via the internet. Mahan Abassi, a Beverly Hills lawyer who ran Hope4Homes, was found guilty of violating Indiana consumer protection laws that are very similar to those that are supposed to protect California homeowners from foreclosure rescue scams.

In Illinois, Attorney General Lisa Madigan had already filed fifty lawsuits against foreclosure consultants by December of 2011 — making her office perhaps the most aggressive of any of the fifty states' attorneys general. "In terms of states that have the most activity targeting Illinois homeowners, we have seen the bulk of complaints from California operations and then Florida," said Illinois AG spokesperson Natalie Bauer. Among the enforcement actions taken by Madigan's office were cases against California-based companies like People's First Financial of San Diego, which was accused of ripping off Illinois residents of thousands of dollars each. Yet People's First Financial still has a website (registered through a private domain registration company to shield the owner's identity), and the company still claims to be in business in San Diego.

"I think that [Kamala Harris] has totally failed the homeowners," said Carlos Marroquin, a housing rights activist in Los Angeles who lost his home to foreclosure several years ago. "Somebody changed the title to my house and defrauded me. I took my complaint to Brown and Harris, but they did nothing." Marroquin called Harris' Mortgage Fraud Strike Force a "public relations" effort.

Since losing his home, Marroquin has organized protests against what he believes is the widespread unwillingness of law enforcement officials to protect homeowners. "Harris needs to open her eyes. These scammers have popped up like popcorn. They're operating freely," he said. "Everybody I talk to, all the homeowners struggling to avoid foreclosure, they have been scammed by two or three people."

Ralph Kanz, an Oakland resident who was defrauded when a broker altered his loan documents, also thinks Harris has done a poor job cracking down on mortgage scams. But he said the problem goes much deeper, and that nearly every law enforcement office is failing the public. "With all these prosecutors, there's the PR part of what they do, and then there's the meat of what they actually do," Kanz said. "They were saying they were helping homeowners, but they were really focused on saving the banks."

Which brings us back to the giant fraud that spawned ten thousand smaller frauds. Grassroots activists like Kanz and Marroquin believe that it's ultimately the unwillingness of prosecutors to truly crack down on banks and the other powerful mortgage industry players that created the conditions for thousands of smaller scammers to operate in California. The proliferation of foreclosure rescue scams is a direct outcome of the fact that the banks were bailed out, and then never held accountable for their original crimes of predatory lending, nor for their ongoing violation of state and federal laws meant to protect borrowers. For example, by routinely violating laws that require banks to provide borrowers with a single point of contact when seeking a loan modification, a relatively small number of mortgage servicers like Bank of America and Ocwen are fomenting frustration and confusion among distressed homeowners. And when law enforcement officials fail to prosecute financial institutions for failing to comply with the law, desperate homeowners often have nowhere to go for help, and so become easy prey for foreclosure rip-off artists.

A recent California Senate Banking and Financial Institutions Committee meeting included testimony from experts who reiterated that the banks that signed the National Mortgage Settlement, along with most of the other mortgage loan servicers in California, continue to break laws that were implemented to protect homeowners seeking loan modifications. Just last week, as the Express reported on its website, the California Reinvestment Coalition released a report showing that the nation's largest banks and mortgage servicing companies continue to violate standards and laws mandated by the National Mortgage Settlement, the California Homeowner Bill of Rights, and new federal mortgage servicing rules.

"Part of the problem is that there's no enforcement of the homeowners bill of rights," said Marroquin. "When you allow the banks to continue to do what they want, people feel helpless, they look to other places for assistance, but then fall into these foreclosure rescue scams."

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