It didn’t take long. Just nine years. But, 198 borrowers who were defrauded by a mortgage relief scam are finally getting their due — or at least part of what they were cheated out of.
This week, the Federal Trade Commission started mailing out checks totaling more than $49,000 to the almost 200 victims who were robbed by a sophisticated mortgage relief scam. That’s roughly $251 per person, likely much less than those financially distressed borrowers were fleeced for by the crooks who told them they could help get their mortgages modified.
Instead, their mortgage payments were effectively stolen.
The FTC first filed suit against the defendants, who operated under the names HOPE Services and HouseHoldRelief, in 2015. The complaint charged that the defendants targeted consumers facing foreclosure, especially those who had failed to get any relief from their lenders.
Pretending to be a “nonprofit” organization with government ties, they falsely claimed they had a high success rate, special contacts who would help get loan terms modified, and an ability to succeed even when consumers had failed previously.
Instead, the FTC alleged, homeowners who made payments did not have their mortgages modified, and their lenders never received the funds, leading some into foreclosure and bankruptcy.
In April 2015, the U.S. District Court for the Central District of California entered a temporary restraining order against the defendants. The criminal enterprise has since been shuttered. Nine years later, the consumer watchdog agency is returning funds collected from the miscreants to victims.
Mortgage Professionals Have A Role To Play
Mortgage professionals can play an important role in helping their clients find the proper channels for relief when they find themselves behind on their monthly payments. At a minimum, brokers and lenders can keep in touch with their borrowers and offer advice about where to seek help when and if it is needed.
For example, you can warn borrowers against paying money in advance to obtain relief, or help borrowers recognize false claims from those pretending to represent a government agency or relief program. Relief is always granted by the servicer who manages the loan, not the federal government or a state entity.
In the case that the FTC is settling funds for now, the defendants pretended to be a “nonprofit” with government ties. They sent mail bearing what looked like an official government seal, and indicated that the recipients might be eligible for a new federal loan modification program they called “an aggressive update to Obama’s original modification program.”
“[Y]our bank is now incentivized by the government to lower your interest rate,” they said.
The defendants also falsely claimed they had a high success rate, special contacts who would help get loan terms modified, and an ability to succeed even when consumers had failed.
After obtaining consumers’ financial information, the scammers informed borrowers that they were “preliminarily approved,” while claiming they would submit consumers’ loan modification applications to the Department of Housing and Urban Development (HUD), the Neighborhood Assistance Corporation of America, and the Making Home Affordable program.
Of course, the MHA application form they sent consumers excluded the page that warns, “BEWARE OF FORECLOSURE RESCUE SCAMS,” and “never make your mortgage payments to anyone other than your mortgage company without their approval.”
Major Red Flags In The Mortgage Relief Scam
The scammers told the victims they were approved for a low interest rate and monthly payments significantly lower than their current payment, and that after making three monthly trial payments, and a fee to reinstate the defaulted loan, they would get a loan modification and be safe from foreclosure.
They also told consumers not to speak with their lender or an attorney, a definite red flag.
In reality, homeowners who made the payments did not have their mortgages modified, and their lenders never received trial payments. Instead, they were contacted by an “Advocacy Department” run by one of the defendants and told that the department would get them an even better loan modification than the one purportedly obtained through MHA, according to the FTC’s complaint.
However, the “Advocacy Department” was just another trick designed to make sure consumers continued to make all of the monthly trial payments.
When consumers raised concerns about continuing foreclosure warnings, sale date notices, and even court dates, they were told that their loan modification was being processed or nearly completed.
By keeping consumers on the hook for months, the FTC charged, the defendants doubled, tripled, or quadrupled consumers’ trial payments.
