The following Article was published by The LA Times
Authorities crack down on mortgage-relief scams nationwide
Federal and state officials filed lawsuits accusing dozens of companies of ripping off struggling homeowners by falsely promising help in avoiding foreclosures or lowering mortgage payments while collecting millions of dollars in illegal upfront fees.The actions came in a joint law enforcement sweep called Operation Mis-Modification, which targeted law firms and counseling services offering assistance in modifying mortgage terms and payments.
Those firms misrepresented their services, including promising legal assistance that was never delivered, officials said. Among the defendants is Garden Grove lawyer Stephen Siringoringo and two business associates. The suits, announced Wednesday, also alleged the companies violated a federal law prohibiting the collection of fees from homeowners until they have received a written modification offer from their lender or mortgage servicer The Consumer Financial Protection Bureau said three suits it filed against eight companies and their owners involved scams that cost homeowners more than $25 million in illegal upfront fees for services such as renegotiating mortgages or preventing foreclosures.
“These companies pocketed illegal fees, taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began,” said Richard Cordray, the bureau's director. “These practices are not only illegal, they are reprehensible.” The bureau issued an advisory to consumers about how to identify mortgage modification scams. The red flags include demands for upfront payments and guarantees that a modification or other assistance will be obtained.
The bureau issued an advisory to consumers about how to identify mortgage modification scams. The red flags include demands for upfront payments and guarantees that a modification or other assistance will be obtained. Among those sued by the bureau were lawyer Siringoringo and business associates Alfred Clausen and Joshua Cobb, who run Clausen & Cobb Management Co.
The operation charged upfront fees of $1,995 to $3,500 from homeowners who in “numerous instances received none of the promised services or relief,” the bureau's suit said. Siringoringo did not immediately respond to an email requesting comment.The State Bar of California said it filed a disciplinary action against Siringoringo, accusing him of charging illegal upfront fees as part of a “large-scale loan modification scheme.” In December, a judge recommended his law license be suspended for 18 months. The suspension is pending appeal, according to the state bar.
Consumer advisory: Don’t fall for a foreclosure relief scam or bogus legal help
Along with other cases from federal and state partners, today we charged that mortgage rescue scammers have taken $25 millions in illegal advance free from consumer. It serves as a reminder of how important it is to watch out for scam artists trying to take advantage of people who need help avoiding foreclosure.
Federal law bans law firms—except under very limited circumstances—from requesting or receiving payment from you for help obtaining foreclosure relief, such as a mortgage modification, before you’ve signed a mortgage modification agreement with your lender.
In one case, we allege that two companies and their principals offering legal services took in over $19.2 million in fees from over 10,000 distressed homeowners nationwide, with most, if not all, of that money coming from illegal advance fees for so-called loan modification services.
Warning signsThere are red flags that a company claiming to offer legal foreclosure relief help may not be worth your money. Watch for the following warning signs and ask more questions:
1. Demands for payment upfront.If a lawyer or someone claiming to offer legal help wants to be paid first—before you receive a modification—they may be breaking the law. A licensed lawyer can ask you to pay first but only if the lawyer is licensed in the state where you live or where your house is located. Even a licensed lawyer in your state can only receive up-front payments if they meet other requirements about what they charge for, how they deposit the money, and if they comply with all other state laws and regulations.
2. Any claim that a modification is guaranteed.Your mortgage company must agree before you can get a modification. A lawyer or someone claiming to offer legal help cannot guarantee you will get a loan modification.
3. A hard sell.Most licensed lawyers do not call or e-mail you directly and push you hard to pay money right away. If someone claiming to be a lawyer calls you on the phone and asks you to sign papers or pay them right away, ask some more questions to be sure it’s not a scam. Here’s a guide to help you determine if it's real legal help or a foreclosure scam.
Third party authorization
When it comes to actually getting help with foreclosure relief, your mortgage company may require you to authorize a third party to act on your behalf, so it’s important to know what this means for you. Only authorize a third party that is trustworthy and be careful about exactly what you're authorizing them to do.
What services can do
Foreclosure relief scams are costly for consumers and also impact servicers and investors in the mortgage industry. We’re posting a new model third party authorization form. That was developed as part of loan modification scam prevention efforts by representatives from government agencies as well as consumer advocacy groups, housing counselors, and the mortgage industry. The form may be useful for mortgage servicers who can choose to use the form in whole, or in part, by adapting other existing forms. The new model form provides additional questions that will help mortgage servicers build on existing privacy and fraud controls by collecting information that will make it easier for servicers to spot red flags of a foreclosure rescue scam.