Crackdown on mortgage scams

By Tim Holland

The Federal Trade Commission (FTC), in conjunction with the Federal Reserve and the Justice Department, made a joint announcement earlier this week in which they made the crackdown on mortgage modification and foreclosure rescue scams an official part of the effort to right the economy. Speaking first at a press conference and later with the release of a detailed press statement, the FTC took the lead in an effort to educate the consumer about the increasing amount of fraud and deception that is evolving around the effort to help consumers that are in difficulty with their mortgage loans.

Unfortunately, many of the people who were duped into signing mortgage loan agreements by unscrupulous lenders are now becoming victims of similar scams to rewrite those mortgages. The FTC announced that it had sent warning letters to 71 companies who may be deceptively marketing mortgage loan modification of foreclosure rescue services.

“Scammers are taking advantage of people in a difficult situation – people who are trying to modify their home mortgages or those who are trying to avoid foreclosure. We’re enforcing the law against these scam artists; we’re putting other on notice that unless they change their ways, they’re next; and we’re working with other government agencies, non-profits, and mortgage companies to reach out to our neighbors in distress with the details of how to get help,” said Chairman Leibowitz.

According to the FTC, these schemes usually operate in the following way. Typically, they use terms like “guarantee” and “97% success rate” to mislead consumers about the mortgage modification or foreclosure relief services they can provide; they charge up-front fees for these “services” – fees legitimate nonprofit organizations do not charge; and they use copycat names or look-alike Web sites to appear to be a nonprofit or government entity. Often, after collecting the fee, these companies do little or nothing to help consumers.

In each case described below, the FTC is seeking, or already obtained, a temporary restraining order to halt the defendants’ illegal conduct.

Federal Loan Modification Law Center (FedMod). FedMod markets mortgage loan modification and foreclosure relief services to homeowners who are in financial distress, delinquent on their mortgages, or in danger of losing their homes to foreclosure. According to the FTC’s complaint, FedMod charges consumers from $1,000 to $3,000 in fees for these services, much of which must be paid up-front, but fails in numerous instances to obtain the promised loan modifications. In radio advertisements, the FTC alleges, FedMod induces homeowners to call its toll-free number by misrepresenting that it is part of or affiliated with the federal government, although it is not. According to the complaint, FedMod often fails to answer or return consumers’ calls or provide updates about the status of their loan modifications, and assures consumers that negotiations with their lenders are proceeding when, in fact, little or no effort has been made to contact the lender.

Bailout.hud-gov.us. According to the FTC’s complaint, defendant Thomas Ryan used a foreign Internet registrar to falsely register two sites – bailout.hud-gov.us and bailout.dohgov.us. The sites were used to entice financially strapped consumers to seek mortgage loan modification services under the guise that the services were associated with, or were actually, the U.S. government, including HUD and the Treasury Department. The FTC alleges that the defendant misled consumers nationwide. A federal district court granted the FTC’s motion for a temporary restraining order which required the Internet Service Provider (ISP) hosting the sites to immediately remove them from the Internet. The FTC and the defendant stipulated to a preliminary injunction prohibiting him from holding himself out as an agency of any U.S., state, or local government, or as being affiliated with any such agency.

Home Assure d/b/a Expert Foreclosure. In this case, the FTC alleges that the defendants promise consumers facing imminent home foreclosure that they can stop the foreclosure, regardless of the amount the consumer owes his or her lender. The defendants are charged with falsely claiming that they have special relationships with lenders, have helped thousands of consumers avoid foreclosure, and will provide a 100 percent satisfaction money-back guarantee. They typically charge consumers an up-front fee of $1,500 to $2,500 but, the FTC alleges, do little or nothing to help them avoid foreclosure and fail to give refunds when foreclosures are not stopped.

Hope Now Modifications LLC and New Hope Property LLC d/b/a New Hope Modifications LLC. On March 24, the FTC announced two related cases alleging that the defendants misled consumers about their ability to provide mortgage loan modification and foreclosure relief, and misrepresented that they were affiliated with or part of the HOPE NOW Alliance, the non-profit, HUD-endorsed organization that is a broad-based coalition of credit and home ownership counselors, lenders, and other mortgage market participants. In each case, the court issued a temporary restraining order with an asset freeze and set dates for a preliminary injunction hearing. The New Jersey Attorney General also filed state court actions against both sets of defendants, and those cases are in litigation.

The FTC announced a new education initiative to reach borrowers directly with the help of a broad array of government, non-profit organizations, and mortgage industry members. Through this initiative, borrowers will receive materials about how to spot and avoid mortgage rescue scams at housing counseling outreach centers, directly from their mortgage companies, and online. Joining the FTC in the effort are The HOPE NOW Alliance, the Homeowners Preservation Foundation, and NeighborWorks America, which are non-profit organizations that work to help distressed homeowners get free help and counseling through HUD-certified housing counselors, all of whom work directly with borrowers to help them stay in their homes.

The FTC’s Web site provides free information on a variety of issues and topics at www.ftc.gov/consumer. And then highlight “Credit and Loans” and then click on “Mortgages/Real Estate.” However, for free advice from a housing counseling agency certified by the U. S. Department of Housing and Urban Development (HUD) the FTC recommends calling (888) 995-HOPE. Also, information can be found at www.ftc.gov/moneymatters and click on “Your Home” for extensive information on how to avoid mortgage and foreclosure scams.