Feds, States Unveil "Operation Stolen Hope" In Effort To Curb Upfront Fee, Foreclosure Rescue Loan Modification Rackets

The Federal Trade Commission recently announced:

• [FTC] Chairman Jon Leibowitz, joined by [others ... a]nnounced Operation Stolen Hope as part of a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involves 118 actions by 26 federal and state agencies. The FTC actions were announced in Nevada, where one in every 23 homes is facing foreclosure. [...] The FTC announced six lawsuits, bringing to 28 the number of mortgage relief cases the Commission has brought since the housing crisis began.(1) Twenty-five state attorneys general and other state and local agencies announced 112 similar actions.(2)

For the entire FTC press release, see Federal and State Agencies Target Mortgage Relief Scams (FTC Leads “Operation Stolen Hope” to Stop Fraud and Help Troubled Homeowners).

(1) According to the FTC's recent announcement, the defendants in these lawsuits are alleged to have falsely claimed that they would obtain mortgage modifications that would make consumers’ monthly mortgage payments substantially more affordable. After charging large up-front fees, they often did little or nothing to help homeowners renegotiate their mortgages. Some of the defendants falsely claimed a high success rate and promised to give consumers refunds if they failed to modify their mortgages, and others misrepresented that they were affiliated with the federal government or consumers’ mortgage lenders or servicers. Each of the cases allege violations of the FTC Act. In addition, several cases allege violations of the Telemarketing Sales Rule (TSR) or the Credit Repair Organizations Act (CROA). In each case, the FTC is asking the court to stop the defendants’ deceptive claims and make them forfeit their ill-gotten gains. In five of the cases, the court already issued a temporary restraining order and froze the defendants’ assets.

The alleged rackets targeted in the FTC lawsuits, linked to the relevant lawsuit documents filed in Federal court, are:

• Crowder Law Group and its co-defendants (Tampa, Florida),
• The Debt Advocacy Center and its co-defendants (Cleveland, Ohio),
• First Universal Lending and its principals (Ft. Lauderdale, Florida),
• Kirkland Young and its manager (Miami, Florida), and
• Truman Foreclosure Assistance and its co-defendants (Miami, Florida).

(2) The FTC legal actions are all civil lawsuits, not criminal prosecutions. Aside from one criminal prosecution that I know of brought by the Michigan Attorney General, the legal actions brought by the various states in this newly-announced law enforcement effort all appear to be either civil lawsuits brought by state attorneys general, or adminsitrative actions/cease & desist orders brought/issued by state regulatory agencies. Inasmuch as there is no threat of jail time for the individual operators in any of these cases (except for one individual in the Michigan case), some may say that Operation Stolen Hope would be more appropriately named Operation Whac-A-Mole, since, in the view of some, only an operation involving criminal prosecution of these operators, coupled with consumer education will be effective in reducing loan modification rackets. Putting these guys out of business using civil lawsuits might shut them down - but others will just "pop up" elsewhere in the future and will operate until they get caught. See Ineffective "Whac-A-Mole" Approach To Battling Loan Modification Scams Leads Housing Non-Profit To Launch National Consumer Education Campaign.