Authorities Uncover Growing ‘Mortgage-Relief Scams’

Federal and state officials have filed dozens of lawsuits against companies they say have been duping a growing number of home owners who are facing foreclosure with big promises to lower their mortgage payments or rescue them from foreclosure while collecting millions of dollars in illegal upfront fees from home owners.

Dubbed Operation Mis-Modification, federal and state officials are uncovering pockets of law firms and counseling services that they say are falsely offering assistance to modify mortgage terms or payments for struggling home owners.

Officials say it’s against federal law for companies to collect fees from home owners until they have received a written modification offer from their lender or mortgage servicer.

In a crackdown on such cases, the Consumer Financial Protection Bureau recently filed three lawsuits against eight companies. The agency alleges that the companies collected more than $25 million in illegal upfront fees for services like modifying a mortgage or trying to prevent a foreclosure. The agency has issued warnings to consumers to be cautious about such mortgage-related scams, looking for such red flags like companies that demand upfront payments and guarantees that a modification or other assistance can be obtained.

Source: “Authorities Crack Down on Mortgage-Relief Scams Nationwide,” Los Angeles Times (July 23, 2014)