As a member of the Senate Special Committee on Aging, I have had the opportunity to work on many issues of importance to older Americans. In addition to our oversight of major programs, such as Social Security, Medicare, and the Older Americans Act, the Committee has long placed a keen focus on fraud that targets our seniors.
Recently, the Committee examined an emerging type of fraud that is especially outrageous. As our nation grapples with a growing mortgage foreclosure crisis, financial predators increasingly are targeting the elderly with scams that can cost them their life savings, and even their homes.
Experts – from federal and state agencies, and from the real estate and mortgage banking industries – described why seniors are particularly vulnerable to fraud. First, many older Americans live on limited incomes, with most of their wealth tied up in the equity their homes have built up over their lifetimes. This “house-rich, cash-poor” situation often leads them to refinance when an unexpected financial demand arises, such as from an illness or the death of a spouse. In recent years, many seniors have been talked into unsustainable mortgages that they cannot afford when the interest rates are reset.
In that situation – often alone, lacking knowledgeable advisors, unaware of government or non-profit services that might help, fearful of contacting their lender, and ready to trust anyone who appears to be offering a way to avoid foreclosure – seniors may find themselves victimized by criminals who take money for negotiations that are never made, or who offer a sale-leaseback arrangement that will lead to the homeowner’s eviction, or who slip a quit-claim deed for signing into a stack of papers ostensibly for refinancing.
Because foreclosure filings are public information, these scammers can easily locate the troubled homeowners, contacting them by phone or mail repeatedly with claims that they can help “save” the home with a mortgage rescue plan. One example is a 72-year-old man from Washington, DC, who faced foreclosure on his home as the result of a business setback. He fell into the trap of a mortgage “rescuer” who told him not to contact his lender or to seek legal advice, and who tricked him into signing over the deed. Fortunately, with the help of government and private-sector advocates, he was able to save his home, but only after much difficulty and anxiety.
Some people in the foreclosure process have made calculated decisions to be there. Having acquired properties with little or no cash investment in hot real-estate markets like Florida or California, they have simply chosen to walk away when market prices fell. Such deliberate speculators deserve little sympathy and should have no claim on taxpayers for assistance.
Senior citizens are another matter. Few of them have the means or the inclination to gamble in real estate as an investment. And even fewer have the time horizon needed to reconstruct their lives after losing their homes, which typically represent their main financial asset.
We need to make sure that we are taking all appropriate steps to prevent foreclosure-rescue fraud against seniors – including the fundamental step of helping victimized people avoid foreclosures in the first instance. Consumer-education efforts by government, private-sector, and non-profit organizations are essential for both objectives. One such commendable national effort, described by several of our witnesses, is the HOPE NOW Alliance, which offers a 24-hour toll-free hotline at 1-888-995-HOPE that provides free counseling to homeowners – elderly or younger -- facing foreclosure.
We also need to consider whether laws and regulations at state and federal levels are well coordinated and well targeted to control foreclosure-rescue efforts, distinguish the legitimate from the abusive, and provide stern punishment and restitution for violations. The State of Maine has a new predatory-lending law that addresses some of the problems, and additional focused measures are in development.
It is tragic that many senior citizens have been led into loans that are triggering foreclosures, and it is shameful that criminals should add to their distress with fraudulent offers of aid. I am determined to strengthen the protections needed to prevent this heartless fraud against elderly Americans.