Mortgage Relief Scam Illustrates Risks to California Homeowners

When you’re in danger of losing your home, you may be willing to try anything. Mortgage rescue scammers often use that sense of desperation to take advantage of California homeowners who are in difficult circumstances. Unfortunately, these predatory companies often cause homeowners to waste time and money they could have put toward either saving their homes or making other arrangements for future housing. In other words, they take fees–sometimes thousands of dollars–and leave consumers worse off than they found them. 

Recently, the Federal Trade Commission (FTC) and the California Department of Financial Protection and Innovation (DFPI) joined forces to take action against a group of companies they say made false promises to consumers struggling with mortgage debt. 

The FTC/DFPI Mortgage Relief Scam Lawsuit

In September, the FTC and DFPI filed suit against four companies and two individuals they allege have cost consumers millions of dollars with sham mortgage relief services. The defendants include: 

Both individual defendants are officers in one or more of the defendant companies. 

These businesses were also operating under a wide variety of names, including: 

The complaint notes that the defendants have been sued in similar actions in the courts of at least five other states in the past five years, and have established a pattern of ignoring orders to pay restitution, penalties, and costs in connection with those actions. 

How Does the Mortgage Relief Scam Work? 

The FTC and DFPI allege that the defendants market and advertise mortgage relief services, including mortgage modification services. However, the complaint alleges that defendants take up-front payment from homeowners, tell them to stop making their mortgage payments, and then string them along without actually securing relief for the homeowners. As a result, some homeowners’ credit has been damaged because they followed defendants’ advice to stop making mortgage payments. Some have even ended up in foreclosure. 

In some cases, the complaint says, these organizations claim or imply that they are associated with government mortgage relief programs and can secure much lower payments or interest rates, or tell homeowners that they will “enroll” them in those programs. 

Consumers receive “offers” that appear to be agreements to new payment terms, and are sometimes expressly told that if they accept the offer, their lenders cannot pursue foreclosure. They also encourage homeowners to sign “cease and desist” letters to their lenders and/or servicers, demanding that they discontinue contact. This prevents the consumer from receiving late notices and other communications that might alert them to the fact that they’ve been misled. 

The FTC and DFPI say the companies have violated a wide range of federal statutes and regulations, as well as California state law. They’ve secured an order to shut them down temporarily, and are asking the court for a permanent injunction against the shady practices they’ve laid out in the complaint and monetary damages. 

But, unfortunately, these companies aren’t the only ones preying on people struggling with mortgage debt and other financial issues, in California and around the country. 

Avoiding Mortgage Rescue Scams and Protecting Your Home

When you’re worried about losing your home, big promises from a shady operation can sound great. It’s tempting to trust someone who says they can solve your problems, but too often that leaves Los Angeles homeowners worse off than they started. If you’re struggling to make mortgage payments, your mortgage is in default or you are facing foreclosure, it’s in your best interest to get information and knowledgeable guidance right away. But, that starts by educating yourself about the providers you’re considering. 

One simple way to get started is to Google reviews for the company you’re considering working with. Be careful, though–you probably noticed that the companies named in the lawsuit were using a variety of names, some of which were very similar. Make sure you’ve found an exact match. This step alone could save you a lot of money, stress, and problems. For example, here’s the Better Business Bureau page for one of the companies named in the lawsuit. You wouldn’t have to read far to know this was probably not the solution you were looking for. 

You can also read up on common scams on reliable websites, such as the Federal Trade Commission or the Consumer Financial Protection Bureau. These resources also suggest additional sources of information, and even agencies or organizations you may be able to contact for help. 

A Debt Resolution Attorney Can Help

Another option is to consult with an experienced Los Angeles debt resolution attorney. Often, people who have fallen behind on mortgage payments or are facing foreclosure can keep their homes through a Chapter 13 bankruptcy repayment plan. 

The attorneys at Borowitz & Clark have decades of experience helping people who are overwhelmed by debt, and understand that there’s no one-size-fits-all solution. That’s why it’s important to work with an attorney who understands and can thoroughly explain your options. 

Borowitz & Clark isn’t just a bankruptcy law firm. Our attorneys are also experienced in debt negotiation, and understand how mortgage modification can work hand in hand with Chapter 13 bankruptcy. To learn more about your rights and options, call 877-439-9717 or fill out the contact form on this page.