[author: Steve Quinlivan]

The CFPB has announced actions to halt two alleged mortgage loan modification scams it believes ripped-off thousands of struggling homeowners across the country. According to the CFPB, these operations took in more than $10 million by charging consumers for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages.

 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.

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