Two California mortgage loan modification operations that allegedly took advantage of financially distressed consumers on the verge of losing their homes had their business activities stopped by the Consumer Financial Protection Bureau.
According to the CFPB, the defendants violated the Dodd-Frank Act and Regulation O, formerly known as the Mortgage Assistance Relief Services Rule. These laws were created to prohibit unfair, deceptive practices to protect struggling homeowners from mortgage relief scams.
U.S. District Court Judges in California have frozen the assets of both the Gordon Law Firm and the National Legal Help Center while the CFPB moves forward with the cases.
“We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure,” said Richard Cordray, director of the Consumer Financial Protection Bureau. “We are especially concerned with those who misrepresent government programs or websites to divert distressed homeowners from needed assistance.”
The CFPB’s complaints allege that both cases illegally charged upfront fees typically ranging between $1,000 and $4,500 from each distressed homeowner for services that rarely materialized.
In total, the two mortgage relief operations took in more than $10 million by charging consumers for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages. After pocketing the illegal fees from distressed homeowners, the defendants typically stopped returning customers’ phone calls and emails, CFPB claimed.
Eventually, the consumers learned that the defendants had not contacted their lenders to obtain relief for them and therefore suffered significant economic damage, including losing their homes.
To demonstrate the validity of their businesses, CFPB said they both claimed to be affiliated with government agencies or programs that endorsed them by using their logos and letterhead to mislead consumers.
Also, the defendants misrepresented that they would secure loan modifications for thousands of struggling homeowners across the country. Both foreclosure assistance firms claimed that they were experienced negotiators who could substantially reduce mortgage payments and identify legal violations by the consumers’ banks or mortgage companies to use as leverage during the negotiations.
Furthermore, both businesses told consumers to stop paying their mortgages and to not interact with their lenders since they would be able to provide relief for them. In the end, the distressed homeowners were at risk of foreclosure and also ruined their credit scores by listening to these mortgage relief operators.
All of these tactics that both defendants utilized were meant to attract victims, add credibility to their schemes, and exploit certain legal exemptions for the practice of law, CFPB said.
“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 instructor general for TARP. “SIGTARP will continue to stop these scams and educate homeowners that mortgage modifications through HAMP are free.”