FTC Launches First Wave Of Smackdown On Scammy Loan Consultants

Yesterday, as part of “Operation Loan Lies,” the FTC and 19 states filed 189 lawsuits, cease-and-desist orders, and other legal actions to shut down loan modification consultants who prey on desperate homeowners. The scammers offer to help solve foreclosure problems for a hefty fee; instead, they fail to modify the loan at all while collecting payments for their services, sometimes even encouraging homeowners to stop communicating with their lenders completely or to send payments to the consultants instead of the bank.

You can read all of the companies and parties here (PDF).

FTC Chairman Jon Leibowitz says this is the beginning of the crackdown, and there will be more legal actions in the coming months. From USATODAY:

Leibowitz used the announcement to put scam artists on notice and urged homeowners to protect themselves from being exploited. He said fraudulent loan modification consultants are “full of hollow promises designed to fatten the pockets of criminals and con men.”

Here are the big warning signs, courtesy of the FTC:

    Be cautious of people who:

  • Make any guarantee
  • Ask for money up front
  • Tell you to make your mortgage payments to them

They also provided the following video about foreclosure rescue scams, which includes stories from real homeowners.

If you think you’ve been approached by a fraudulent foreclosure rescue consultant or company, you can report it to the FTC via either www.ftc.gov or by calling 877-FTC-HELP.

If you do indeed need counseling on how to prevent foreclosure, call the FTC’s free counseling service at:

888-995-HOPE(4673)

Or check out the resources on the Housing and Urban Development (HUD) website: www.hud.gov

“FTC, 19 states act to stop sham loan consultants “ [USATODAY] (Thanks to Snarkysnake!)
“Foreclosure scams targeted in U.S., state and local crackdown” [Los Angeles Times]

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(Photo: Podknox)