The Consumer Financial Protection Bureau said it has halted two alleged mortgage-modification scams that ripped-off thousands of homeowners facing possible foreclosure across the nation.
These operations took in more than $10 million by charging consumers for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages.
Federal judges in California have ordered a halt to both the Gordon Law Firm and the National Legal Help Center, and frozen their assets while the CFPB moves forward with the cases.
The bureau said it is particularly concerned about schemes that lure victims by falsely claiming they are endorsed by or represent the government. These tactics are used by mortgage-relief scamsters because they add credibility to their schemes.Some falsely indicate that they are associated with the government’s HAMP effort, or Home Affordable Modification Program, which offers incentives to lenders to assist borrowers with lowering mortgage payments. HAMP is funded by the Troubled Asset Relief Program (TARP), the primary U.S. bailout program.
“It is absolutely unacceptable for unscrupulous con artists to take advantage of our nation’s housing crisis by targeting homeowners looking for help from TARP’s Home Affordable Modification Program,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “We thank the CFPB for protecting homeowners. SIGTARP will continue to stop these scams and educate homeowners that mortgage modifications through HAMP are free.”
The CFPB complaints against the two operatons allege that the defendants violated the Dodd-Frank Act and Regulation O, formerly known as the Mortgage Assistance Relief Services Rule. These laws prohibit unfair, deceptive, or abusive acts or practices and protect distressed homeowners from mortgage relief scams.
Violations of the law alleged in the CFPB’s complaints in both cases include:
- Illegally charged large upfront fees: It is against the law for mortgage relief providers to charge fees before services are provided. However, the defendants in both cases collected fees early on, typically ranging between $1,000 and $4,500 from each distressed homeowner, for services that rarely if ever materialized.
- Deceptively claimed to be affiliated with government agencies and/or programs: Defendants in both cases used deceptive language and mailings with government logos, letterhead, and/or marks to mislead consumers into believing that their mortgage relief services were sponsored by or associated with government agencies or programs.
- Misrepresented that they would secure loan modifications for consumers: Defendants misled consumers that the defendants were experienced negotiators who would substantially reduce mortgage payments, and that defendants would identify legal violations by consumers’ banks or mortgage companies to use as leverage in loan modification negotiations. However, it appears that defendants failed to provide meaningful relief for consumers.
- Instructed consumers to stop paying their mortgages and stop contacting their lenders: Financially distressed consumers were told to avoid interactions with their lenders and to stop mortgage payments because the defendants would provide relief, potentially putting the consumers unknowingly at risk of losing their homes and/or ruining their credit scores.