Foreclosure Relief Scams Draw Attention From the Feds

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August 14, 2014 | By RGR Marketing Blog

What's the Deal With "Regulation O"?

The Federal Trade Commission’s Mortgage Assistance Relief Services Rule, or “Regulation O,” was put in place to protect desperate homeowners from mortgage assistance relief services that employ underhanded or deceptive practices.

Regulation O stipulates that mortgage relief firms may not collect upfront fees, and must clearly disclose pertinent information prior to signup. It also prohibits misrepresentation of services, and contains several other provisions designed to keep consumers from being duped by unscrupulous and predatory firms.

However, Regulation O was not enough to stop the lawyers targeted in a recent FTC sweep from preying on distressed homeowners. “Operation Mis-Modification” took aim at dubious attorneys and other scammers suspected of bilking already financially strapped citizens out of hundreds and even thousands of dollars.

The sweep found that many of those suspected were indeed collecting substantial advance fees, and making empty promises that left beleaguered homeowners in worse shape than they would have been had they simply capitulated to foreclosure. Some collected the fees and did absolutely nothing, after promising to provide legal services.

The Fed Takes on Mortgage Related Schemes Targeted at Desperate Consumers

From CFPB Director Richard Cordray: “We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure. These companies pocketed illegal fees — taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began. These practices are not only illegal, they are reprehensible.”

The feds say these scams were often difficult to detect, as many of the perpetrators were law firms, a distinction that lent credibility and deflected suspicion away from their illegal operations.

Now, the FTC, the Consumer Financial Protection Bureau, and many state Attorneys General have filed a total of 41 lawsuits against these shady dealers, whose ranks include the Chicago-based Mortgage Law Group, Utah’s Danielson Law Group, Hoffman Law Group of Florida, and attorney Stephen Siringoringo of California.

The lawsuit aims to collect financial restitution for the victims of these scams, and the total awards could end up being quite substantial. The CFPB has indicated that the three firms it is pursuing collectively bilked consumers of more than $25 million.

More Negative Side Effects based on Mortgage Relief Fraudsters

The impact of the fraudulent activities committed by these entities is likely to have another unfortunate side effect: consumers in need of mortgage relief, refinancing assistance, or debt restructuring may now be more hesitant than ever to seek it out.

Legitimate foreclosure relief firms will now have to work doubly hard to earn consumer trust. Those that are unclear on any of the provisions put into place by Regulation O would do well to research them, and to avoid even the appearance of non-compliance.

[Photo Via: Consumer Watch Dog]

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What's the Deal With "Regulation O"?

The Fed Takes on Mortgage Related Schemes Targeted at Desperate Consumers

More Negative Side Effects based on Mortgage Relief Fraudsters

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More Negative Side Effects based on Mortgage Relief Fraudsters

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