WASHINGTON, July 23 U.S. regulators and 15
states announced a wave of lawsuits on Wednesday against law
firms and mortgage assistance companies they said have scammed
borrowers since at least 2011 by falsely promising home loan
modifications and other foreclosure relief.
The U.S. Consumer Financial Protection Bureau and Federal
Trade Commission together filed nine lawsuits against people and
companies they said misled consumers about their eligibility for
modifications and inflated the amounts borrowers could save.
"Not only do they collect hundreds or thousands of dollars
in upfront fees from homeowners and then not deliver any
results, but they make the loss of people's homes even more
likely by telling consumers not to pay their mortgage or to talk
to their lenders or servicers," Katie Fallow, the FTC's deputy
director for consumer protection, said on Wednesday.
The companies, some of which have already ceased operations,
also violated rules that ban relief providers from receiving
payment before the borrower reaches a modification agreement
with the bank, the regulators said.
State attorneys general also are bringing a total of 32
legal actions as part of the sweep, which the agencies are
calling "Operation Mis-Modification."
After the 2007-2009 financial crisis, millions of Americans
were unable to make payments and found themselves facing
foreclosure. Struggling borrowers sought to change the terms of
their loans and lessen payments.
Regulators say some of the service providers that cropped up
offering relief actually took advantage of desperate consumers.
Some consumers were unable to reach anyone at the company
after they paid an initial fee. Others believed they were paying
for legal representation, but never spoke to a lawyer, said
Steve Antonakes, deputy director of the consumer bureau.
"These companies are nothing more than fronts for scammers,"
Illinois Attorney General Lisa Madigan, who filed lawsuits
against two Chicago-area companies, said in a statement.
Attorneys general from Arizona, Delaware, Florida, Indiana,
Kansas, Louisiana, Maryland, Michigan, New Mexico, New York,
North Carolina, Ohio, Washington and Wisconsin filed related
(Reporting by Emily Stephenson. Editing by Andre Grenon)