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CFPB targets loan modification scams

Tuesday, December 11, 2012

The Consumer Financial Protection Bureau (CFPB) has halted what it believes are two mortgage modification scams which falsely promised thousands of struggling homeowners that they would prevent foreclosures or renegotiate troubled mortgages. The CFPB says these operations took in more than $10 million promising families relief from foreclosure after illegally pocketing thousands of dollars in each case for services rarely delivered.

“We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure,” said CFPB Director Richard Cordray. "We are especially concerned with those who misrepresent government programs or websites to divert distressed homeowners from needed assistance."

According to the CFPB violations include:

· Illegal upfront fees: It is illegal for mortgage relief providers to charge fees before services are provided. However, defendants collected fees early on, ranging from $1,000 to $4,500 from each homeowner for services that rarely if ever materialized.

· Deceptive claims of affiliation with government agencies or programs: Defendants used deceptive language and mailings with government logos or letterhead to mislead consumers into believing that their mortgage relief services were sponsored by or associated with government agencies or programs.

· Misrepresentations on loan modifications: Defendants misled consumers that they were experienced negotiators who would substantially reduce mortgage payments, and identify legal violations by consumers’ banks or mortgage companies to use as leverage in loan modification negotiations.

· Instructions to consumers to stop paying their mortgages: Financially distressed consumers were told to avoid contacting 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.

According to the CFPB, the National Legal Help Center falsely claimed that they would provide legal representation for consumers even though the individual defendants are not attorneys and consumers received no actual legal representation.

The CFPB says Chance Edward Gordon and Abraham Michael Pessar of the Gordon law firm led consumers to believe that a law firm was working with their banks and mortgage companies to modify mortgage loans, which typically failed to deliver relief.

The CFPB asked a U.S. District Court to halt the defendants’ actions and freeze their assets while the case proceeds.

Consumers can file a complaint with the CFPB at www.consumerfinance.gov or by calling toll free: 1-855-411-2372.