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Federal regulators warn of mortgage relief scams after lawsuit

You’re in over your head on your mortgage. You’re facing foreclosure. Don’t hire any help or consider a loan modification until you read further.

The Federal Trade Commission (FTC) announced Jan. 19 that it has sued ten companies and three individuals who make up a network called Preferred Law, PLLC. Lisa Weintraub Schifferle, an attorney for the FTC’s Division of Consumer & Business Education, said the defendants made false promises about what kind of help they could offer homeowners in trouble with their mortgages.

“The companies claimed a nearly perfect success rate, promised that their attorneys would prevent foreclosure and get loan modifications to reduce consumers’ mortgage payments, and misrepresented that they were affiliated with the government or customers’ lenders,” wrote Schifferle in the commission’s latest alert.

Schifferle said what Preferred Law, PLLC was really doing was taking upfront fees from the homeowners — and doing absolutely nothing. No loan modifications. No debt consolidations. No interest reductions. The whole network, Schifferle said, was a scam. She said some of the homeowners not only lost the money they paid in fees, but they also lost their homes.

The FTC offered these tips for avoiding mortgage relief scams:

  • Don’t pay an up-front fee. Unless they’re attorneys following specific rules, it’s illegal for companies to charge you until they’ve negotiated a loan modification and you’ve accepted it. So, don’t pay them until they fulfill their promise.
  • If a company claims attorneys will be helping you, check it out. Make sure they’re licensed to practice law in your state. Some companies falsely claim to be working with attorneys to get your business and charge fees in advance.
  • Beware of companies that tell you to stop contacting your lender. You should always feel free to contact your lender directly to see whether they can offer you additional options. Companies that tell you otherwise are breaking the law.
  • Find free, reliable mortgage assistance. To contact a free, HUD-approved housing counselor, visit the U.S. Department of Housing and Urban Development or call HOPE NOW’s national 24/7 toll-free hotline, 888-995-HOPE. An independent, non-profit counselor can help you understand your situation, identify your options, and try to find an alternative to foreclosure.

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