Feds Announce Litigation Against Law firms for Deceptive Loan Modification Practices

Litigation against law firms, greedy attorneys, affiliated companies and others that claimed to perform work on behalf of homeowners struggling to pay their mortgages.

The other day a caller said “I used a document preparer or bankruptcy petition preparer. Certainly they have obligations to keep my social security number confidential?” Unfortunately I had to say “Oh how wrong you are.”

Bully tactics used to scare or coerce buyers.

According to the American Bar Association Journal Federal agencies and 15 states have announced a wave of litigation against law firms, greedy attorneys, affiliated companies and others that claimed to perform work on behalf of homeowners struggling to pay their mortgages.  The states involved in the enforcement sweep are Arizona, Delaware, Florida, Indiana, Illinois, Kansas, Louisiana, Maryland, Michigan, New Mexico, New York, North Carolina, Ohio, Washington and Wisconsin.

“The defendants disguised their false promises of foreclosure relief for struggling homeowners with claims that they were performing legal work.”

Think about the information you are giving this stranger: all your financial information, your children’s names, bank accounts and your social security number. You do this without the slightest guarantee that the information will be kept safe.

Common themes in the 41 suits (the CFPB filed three, the FTC six and states another 32, the NLJ says) are upfront fees charged to homeowners, with little or no meaningful work allegedly provided to them in return.  “The defendants disguised their false promises of foreclosure relief for struggling homeowners with claims that they were performing legal work,” says the CFPB. “These tactics are used by foreclosure relief scams to attract victims, add credibility to their schemes, or exploit certain legal exemptions for the practice of law.”

According to http://www.ladanlaw.com/orlando-criminal-defense-attorney, such upfront fees are banned by the a federal consumer-protection rule initially adopted by the Federal Trade Commission that is now known as “Regulation O,” the plaintiffs say. They also accuse defendants of misrepresenting to homeowners the mortgage-relief services and benefits they would get for their money.

Additional article from Huffington Post

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Note from Diane – never rely on the representations of others who profess that they can “help” you out of your problems; even if those people of lawyers. Always do your own investigation about the options, critically look at their promises, check out that person’s reputation and then make an informed decision.  If it appears to be too good then it probably is.  Here is a consumer advisory from the CFPB

The next wave of scams is the short sale programs. Homeowners do not realize the potential liability they may face when entering into a short sale. They must obtain quality legal advice and competent tax advice before making that decision. Each state has different laws that may protect the homeowners. Short sales may waive those protections.

Do not assume that a lawyer is licensed; check them out with the state bar where they are licensed.  Here is the link to the State Bar of Arizona.