DREAMS FORECLOSED: The Rampant Theft of Americans' Homes

DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure “Rescue” Scams
PART 1: STEALING WHATEVER IS NAILED DOWN
A new wave of fraud and fast-dealing is ripping the homes right out from under thousands
upon thousands of Americans. It's the ironic undercurrent of what for homeowners has been
mostly good news: the coast-to-coast spike in real estate values.
Scam artists fish where the fish are, and one of the great mother lodes of cold, hard cash
these days is literally under many Americans’ mattresses – the homes they sleep in each night. As
home price appreciation handily outpaces both inflation and traditional housing appreciation rates 1
many Americans, sometimes unwittingly, find themselves sitting on five- and six-figure chunks of
home equity.
But the growth of this pile of wealth -- and an unprecedented variety of ways to tap it -- has
coincided with tremendous financial pressures on a wide swath of American families. Rising costs
for housing, health care and education, coupled with increasing job insecurity, income volatility
and downward pressure on real incomes, have fueled a dramatic surge in bankruptcy filings,
mortgage defaults and other financial distress. 2
A very considerable role in this distress is also played by the nation’s lenders, with their
increasingly reckless extension of credit plus their striking array of grossly unfair and extremely
high-priced credit products collectively known as “predatory lending.” Assistant Minnesota
Attorney General Prentiss Cox goes so far as to blame part of his state’s recent outburst of
foreclosure “rescue” scams on “the tail-end effects of a sub-prime lending cycle” where consumers
threw in the towel trying to pay off high-priced loans.
And then there’s the nature of foreclosure itself and the current system’s severe
shortcomings. Homeowners facing foreclosure are by definition short of money and vulnerable.
Many states have non-judicial foreclosure, meaning no court is overseeing the process. And it’s a
process sadly lacking in transparency; a homeowner holding a notice of default often is given no
clear sense of where to turn next or how much time there is to make crucial decisions.
Finally, there’s the troubling lack of people who might help. Consumer law can be difficult
1 See “U.S. Housing Boom Benefited More Markets in ’04, Study Says” in the Wall Street Journal May 4, 2005. The
story cites a Federal Deposit Insurance Corporation study in stating that “More U.S. housing markets were booming in
2004 than at any time in at least 30 years,” with a boom defined as “a three-year, inflation-adjusted price gain of 30%
or more.” Also see “Home Prices: Our Towns” in the 2/11/05 Wall Street Journal for a brief overview of the breadth
and depth of the price-appreciation surge.
2 Among many other sources documenting what’s come to be known as “The Middle-Class Squeeze” are the
publications of the non-profit research and advocacy group Demos (at http://demos-usa.org/) and the work of Harvard
Law School professor and noted bankruptcy expert Elizabeth Warren (lists of her work at
http://www.law.harvard.edu/faculty/directory/facdir.phpid=82)
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