FTC Cracks Down On Bogus Mortgage Relief Lawsuits

If you live in an area hit hard by the collapse of the housing market, you might have received a letter from a company promising that if you join other struggling homeowners in filing lawsuits against your lender, you can get mortgage relief, a cash reward and maybe even the title to your home. What it doesn’t mention is that you could end up being scammed out of thousands of dollars.

The Federal Trade Commission is in the process of going after companies that sucker people in with the promise of justice and cash, only to leave them high and dry. In its first case against an alleged scammer, the FTC has gotten a U.S. district court to halt operations and freeze the assets of a California man who operates three sites — HouseHoldRelief.org, FreeFedLoanMod.org, and MyHomeSupport.org — that the FTC says raked in more than $1 million from homeowners who had been promised relief through so-called “mass joinder” lawsuits.

Mass joinder suits are not the same as class-action suits, and they often require plaintiffs to pay legal fees up front.

In this case, the FTC alleges the man scammed consumers in two ways.

First, the agency claims the man sent out direct mail masqueraded as a specialty law firm, Precision Law Center, which promised that by joining other homeowners in a mass joinder suit against their lender, they could get the following:
“Forgiveness of all delinquent payments, fees and penalties,”
“Halt and reverse (sic) foreclosure proceedings,”
“Credit restoration,”
“Possible compensatory damages in the amount of $22,500.00,”
“Possible punitive damages in the amount of $52,500.”

According to the FTC, the company also claimed an 80-85% success rate for these kinds of lawsuits, and that in addition to the above results, homeowners could also receive the title to their homes free and clear; have their principal balance reduced to 70% of the current value and their interest rate reduced by half.

“In fact,” writes the FTC, “the defendants allegedly operated a sham law firm and only engaged attorneys briefly to file the lawsuits, after which either the defendants neglected the suits, or the suits were dismissed.”

People paid anywhere from $6,000 to $10,000 to be part of these built-to-fail, dead-end lawsuits.

But wait, there’s more.

The company is also accused of operating a second scam, in which it sold “forensic loan audits” for between $795 to $1595 and allegedly promised but failed to deliver relief from unaffordable mortgages and foreclosures.

The FTC alleges that consumers were told these audits would find lender violations at least 90% of the time.

“The defendants falsely portrayed themselves as non-profit, free, accredited, or HUD-certified housing counselors with special qualifications to help obtain mortgage loan modifications and avoid foreclosure,” writes the FTC. “They promised consumers that the forensic loan audit would be the only charge not covered by their ‘free’ service, and that if the ‘audit’ did not turn up any violations, consumers could get a 70 percent refund and still obtain a loan modification.”

The FTC has posted this page to inform consumers about mass joinder lawsuit scams. It also include info on how to find legitimate legal assistance.

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  1. Blueskylaw says:

    “if you join other struggling homeowners in filing lawsuits against your lender, you can get mortgage relief, a cash reward and maybe even the title to your home. What it doesn’t mention is that you could end up being scammed out of thousands of dollars.”

    It says you can get mortgage relief, not WILL get. It says you can get a cash reward, not WILL get. It says you might get the title to your house, not WILL get the title to your house.

    See, reading is fundamental.

    • Cat says:

      Agreed. But I’m willing to bet that reading wasn’t the victims’ strong suit.

    • Lyn Torden says:

      However, given that no actual attempt to get these benefits is made, it SHOULD say WILL NOT. To say MAY means that a reasonable attempt WILL be made. That didn’t happen and was never intended to happen. So the claim really was wrong and misleading.

  2. Hi_Hello says:

    that’s a pretty neat scam.

  3. Loias supports harsher punishments against corporations says:

    Sort of a tangent to this, I am so sick of all the radio commercials trying to get you to pay for services to help you with your debt.

    They keep saying they will help you call creditors, get the IRS to put you on a flat payment plan, etc. All these services are offered for free, as reported by Consumerist.

    It’s one of those things where if I had a ton of money I’d pay for radio commercials just to let everyone know it’s free and hopefully put those people out of business.

  4. SavijMuhdrox says:

    on a tangent.. do people actually fall for websites with names like the ones he has listed?

    HouseHoldRelief.org, FreeFedLoanMod.org, and MyHomeSupport.org???

    i feel like, in this day and age.. silly extended wording on web domains is a straight-up symbol of a scam-in-progress..

    • Loias supports harsher punishments against corporations says:

      http://www.bedbathandbeyond.com

      Nope, URL wording is still a vital advertising method even today.

    • speaky2k says:

      To me it’s not the name necessarily, it’s the .org with the name. If it is truly an organization (.org) to me that means a club or group of like minded people, not a business. If it was the names followed by .com then it becomes a commercial website and may be more legitimate… But after reading the claims, I would have been highly suspicious even if it was a .com.

      • kosmo @ The Soap Boxers says:

        It’s not as if you need to jump through any hoops to get a .com vs a .org. It’s likely the only reason these people have a .org is because someone beat them to the punch on the .com variant.

        I have several .coms, but also have one .org. Not because I’m doing anything bad with the .org, but simply because I wanted a very short email address (it’s 11 total characters) and all the short .coms are already taken.

  5. winstonthorne says:

    Who the heck would buy an extended warranty from a company that’s pretty much dead already (just not smart enough to realize it)?

    Also, “master agreement” sounds like some kind of court document that Sears/KMart will have to sign during their next bankruptcy to repay their creditors 0.0000001 cents on the dollar. Terrible name for a service plan.