Regulators Target Foreclosure Relief Scams

The Consumer Financial Protection Bureau has partnered with the FTC to protect distressed homeowners from fraudulent loan modification companies.

As if distressed homeowners didn’t already have it hard enough, some of them have become the prey of mortgage relief scams, regulators say.

The Consumer Financial Protection Bureau, the Federal Trade Commission and 15 states recently brought a slew of lawsuits against dozens of mortgage relief companies, the Los Angeles Times said.

From our Solutions Center: Find a better mortgage in seconds

The agencies allege that companies misled homeowners into thinking they could lower their mortgage payments to prevent foreclosure and illegally demanded advance fees from the homeowners, according to Mortgage Professional America, a mortgage and finance news site.

“Mortgage relief schemes like these target people who are already having financial problems and, all too often, inflict even further harm on them,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We’re determined to stop operations that illegally charge upfront mortgage relief fees or make empty mortgage relief promises.”

Authorities said the enforcement effort, dubbed Operation Mis-Modification, found that foreclosure relief scams cost consumers millions of dollars in illegal fees and, in the worst-case scenario, many people lost their homes. said:

In schemes dating back to 2011, possibly as far back as December 2010, companies charged hundreds, sometimes thousands, of dollars in upfront fees, in addition to monthly fees of about $500 for their allegedly false promises of loan modification and legal representation. The lawsuits claim consumers were told they could receive lower interest rates, lower mortgage payments and that foreclosure proceedings would stop. Such deceptive practices are illegal under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

A federal rule bans mortgage modification companies from collecting fees until after homeowners have a signed modification agreement from the mortgage servicer or lender.

Sign up for our free newsletter

Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash. It doesn't cost a dime, so why wait? Click here to sign up now.

Recommended For You


Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,892 more deals!