Chicago Neighborhood Hit by Mortgage Loan Fraud | WBEZ
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Eight Forty-Eight

Chicago Neighborhood Hit by Mortgage Loan Fraud

Some struggling homeowners have fallen prey to companies that promise to lower their mortgage payments. These fraudulent businesses bilk homeowners by requiring an upfront payment and then don't fix the mortgage. This practice is happening all around the country. Here in Chicago, one neighborhood group is fighting back against the fraud.

Organizers at the Brighton Park Neighborhood Council stroll the 4400 block of South Christiana. They pass two-flat brick apartment buildings with flower pots on porches and children enjoying the summertime weather in the grass.

But this Brighton Park neighborhood has been hit with foreclosures and mortgage scams. Untoward companies have been charging homeowners in this area thousands of dollars to modify their loans. What some homeowners don't realize is that there are free services and programs to modify their loans.

ambi: Spanish instructions

On their walk, the Brighton Park volunteers hand out yellow flyers and warn homeowners about the fraud. The neighborhood council is a federally certified housing counselor. In the past year or so it says it helped about 80 clients who have come to them in dire need. Homeowners who paid up to $5,000 and still didn't get their homes saved.

Graciela Serna and her husband futilely paid $1,500 to a company that promised a mortgage reduction. Now they wait for a foreclosure court judgment on their Brighton Park home.

SERNA: This is a huge frustration. I should be more positive. But there have been times when this whole thing has made me sick. I'm having health problems, and my husband says it's mental. It's made me sick. I'm depressed, I get frustrated—this feeling that I can't do anything.

The Sernas are now taking action to help forewarn others. They are out this weekday evening canvassing against these companies.

Illinois Attorney General Lisa Madigan has taken action against these companies. She has brought 34 lawsuits against mortgage rescue operators and sent out more than 400 cease-and-desist letters. There are more than 200 ongoing investigations.

MADIGAN: Right now, loan modification scams are certainly the most prevalent scams that we see.

Madigan's office has gotten $1.7 million in restitution for homeowners. She helped initiate a new law in 2006.

MADIGAN: It's not illegal to pay somebody once they've rendered you service in Illinois for a modification. It is, however, illegal for them to be taking the money upfront. And we had put that in place in Illinois because of the hundreds, the thousands and thousands of people who were getting defrauded.

Financial watchdogs and federal agents acknowledge that cracking down on unfair mortgage rescue operators is difficult and hard to track. Companies go out of business, change their names and they pounce on homeowners' vulnerabilities.

In the case of Brighton Park, companies have taken advantage of Spanish speakers.

I tried calling several of the businesses that the Brighton Park Neighborhood Council has accused of fraudulent loan modifications. Many numbers were either out of service or didn't return my phone call. Here's a message from one of the companies on the list, VIP Enterprises.

The scams are a national problem, too. The Better Business Bureau has logged complaints in other cities. The FBI has done takedowns in Operation Malicious Mortgage.

Ami Shah is a program assistant for the nonprofit Housing Action Illinois. She says there are uneducated homeowners willing to pay a so-called loan modification company. Some people also think paying gives them an advantage.

SHAH: When someone invests something like some money, they're thinking that might put them ahead of all the people waiting in line, which just isn't the case.

In Brighton Park, Graciela Serna and her husband did eventually find out the status of their home. It's officially in foreclosure. The family has until September to move out.

Music Button:  Clutchy Hopkins/Lord Kenjamin, "The Old Spot", from the CD Music is my Medicine, (Ubiquity)

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