- It's illegal to charge upfront fees.
The foreclosure relief firm can't collect money from a customer unless it delivers – and the customer agrees to – a written offer of mortgage relief from the customer's lender or servicer.
- The foreclosure relief firm must clearly and prominently disclose certain information before it signs people up for your services.
It must tell customers upfront key information about its services, including:
- If the firm advises someone not to pay his or her mortgage, it must clearly and prominently disclose the negative consequences that could result.
- The firm must not advise customers to stop communicating with their lender or servicer.
Under the Rule, it's illegal to tell people they shouldn't communicate with their lender or servicer.
- The firm must disclose key information to its customers if it forwards an offer of mortgage relief from a lender or servicer.
It must give the customer a written notice from the lender or servicer describing all material differences between the terms of the offer and the customer's current loan.
The firm must also tell its customers that if the lender or servicer's offer isn't acceptable to them, they don't have to pay the firm’s fee.
- The firm must not misrepresent its services.
Under the Rule, it's illegal to make claims that are false, misleading, or unsubstantiated.
· Collecting fees before obtaining a loan modification: Companies cannot legally accept payment for helping to obtain a mortgage modification for a consumer before the consumer has a modification agreement in place with their lender. All of these companies charged consumers advance fees without having first obtained modifications for them, which was not only illegal but also caused significant harm to consumers who often paid thousands of dollars without ever receiving a modification. The Bureau alleges that, after pocketing illegal fees from one distressed homeowner after another, defendants typically stopped returning consumers’ phone calls and emails.
· Inflating success rates and likelihood of obtaining a modification: The firms’ marketing materials misrepresented the likelihood that they would help consumers save substantial sums in mortgage payments. Ultimately, many consumers who paid these companies advance fees did not receive a mortgage modification and ended up worse off than they began.
· Duping consumers into thinking they would receive legal representation: All of these companies engaged in a particularly egregious scam where the perpetrators used their status as attorneys to dupe consumers into thinking they would receive legal representation when many consumers never spoke with an attorney or had their case reviewed by one.
· Making false promises about loan modifications to consumers: During meetings, some consumers were misled into believing that they were eligible for a loan modification. Other consumers were promised that they would receive relief within a few months. In the end, many consumers learned that the defendants had not contacted their lenders or obtained any meaningful relief for them. Ultimately, homeowners across the country lost thousands of dollars and suffered significant economic injury, including losing their homes.
Secondly, there is the complaint against The Mortgage Law Group (TMLG) and the Consumer First Legal Group (CFLG), alleging that they 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. Both TMLG and CFLG have ceased operations, but the Bureau is seeking redress for consumers harmed by their practices and permanent injunctive relief against the principals, Thomas Macey, Jeffrey Aleman, Jason Searns, and Harold Stafford.[vi]
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.[vii]