[Congressional Record Volume 154, Number 61 (Thursday, April 17, 2008)]
[Senate]
[Page S3160]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself, Ms. Collins, and Mrs. Lincoln):
  S. 2888. A bill to protect the property and security of homeowners 
who are subject to foreclosure proceedings, and for other purposes; to 
the Committee on Banking, Housing, and Urban Affairs.
  Mr. KOHL. The legislation I have introduced with Senators Collins and 
Lincoln attacks the growing problem of foreclosure rescue scams. I held 
a revealing hearing in the Aging committee that uncovered the ways scam 
artists prey on homeowners already in financial and emotional distress. 
These scams are another consequence of the mortgage crisis that is 
plaguing our country.
  For most people, their home is their greatest asset. When a homeowner 
falls behind in their mortgage payments, it is a great emotion strain. 
Scam artists prey on an owner's desperation and give them a false sense 
of security, claiming they can help ``save their home.'' The types of 
scams vary, but the end result is that the homeowner is left in a more 
desperate situation than before.
  There are three types of prevalent scams. The first is ``phantom 
help,'' where the ``rescuer'' claims that they call the homeowner's 
lender and re-negotiate the loan for a fee. Often the homeowner will 
pay the fee and the ``rescuer,'' will abandon the homeowner without 
performing any intervention. The second is a ``rent-to-own'' scheme 
which is set up to fail. A homeowner will sign over the title of the 
house and make monthly payments to the scammer in order to help rebuild 
their credit. However, the monthly payments are extremely high and 
often result in the homeowner violating the contract and being evicted. 
Finally, a homeowner may be tricked into unknowingly signing over the 
title of their house and power of attorney to the scammer and the 
scammer will then sell the house to a third party. The scam artist 
might give the homeowner a small amount of money, but often only a 
fraction of the actual selling price.
  As one can clearly see, these scams are well crafted and extremely 
complicated. Catie Doyle, the Chief attorney for Legal Aid Society of 
Milwaukee, testified before the Special Committee on Aging, describing 
the difficulties and problems lawyers are facing when trying to help 
victims of these scams. One major problem she pointed out was that 
lawyers have to piece together both state and federal laws to untangle 
these scams.
  The Foreclosure Rescue Fraud Act that Senators Collins, Lincoln and I 
are offering will remedy Ms. Doyle's concerns. While there are some 
states that have foreclosure rescue scam laws or are in the process of 
enacting them, many homeowners still go unprotected from these 
predators. This legislation will require that all contracts between a 
foreclosure consultant be in writing and fully disclose the nature of 
the services and the exact amount. Additionally, the bill prohibits up-
front fees from being collected and prohibits a ``consultant'' from 
obtaining the power of attorney from a homeowner.
  I also have a letter of support from a variety of consumer groups 
including the Center of Responsible Lending, Consumer Federation of 
America, National Community Reinvestment Coalition, and the National 
Council of La Raza.
  The foreclosure crisis is real. Most communities across the country 
are experiencing both the primary and secondary effects. It is 
important that we address fraud at the front end of the lending 
process, as well, as for those who face foreclosure. I hope that we can 
work together to move this legislation forward.
                                 ______