CFPB, California Courts Shut Down Two Foreclosure Scams

by devteam December 12th, 2012 | Share

Based on complaints from the ConsumerrnFinancial Protection Bureau (CFPB) a California court has shut down thernoperations of two alleged loan modification scams based in the state but operatingrnthroughout the U.S.   CFPB said it believes that thousands ofrnhomeowners were defrauded of more than $10 million by the Gordon Law Firm andrnthe National Legal Help Center.</p

CFPB’s complaints allege violations ofrnthe Dodd-Frank Act and Regulation O, formerlyrnknown as the Mortgage Assistance Relief Services Rule. These laws prohibitrnunfair, deceptive, or abusive acts or practices and protect distressedrnhomeowners from mortgage relief scams.   Both complaints allege that the defendants:   </p<ul class="unIndentedList"<liIllegally charged large upfront feesrnbefore services were provided. Therndefendants in both cases allegedly collected fees typically ranging betweenrn$1,000 and $4,500 early in the process for services that seldom materialized.</li<liUsed deceptive language and mailingsrnwith government logos and other markings in order to appear their mortgagernrelief services were sponsored by or associated with government programs orrnagencies.</li<liMisrepresentedrntheir qualifications, claiming they were experienced negotiators who would substantially reduce mortgagernpayments, and that they would identify legal violations by consumers’ banks orrnmortgage companies to use as leverage in loan modification negotiations.rnHowever, it appears that defendants failed to provide meaningful relief forrnconsumers.</li<liTold financially distressedrnconsumers to avoid interactions with their lenders and to stop mortgagernpayments because the defendants would provide relief, potentially putting thernconsumers unknowingly at risk of losing their homes and/or ruining their creditrnscores. </li</ul

The CFPB also alleges that,rnafter the fees were illegally collected the defendants in both cases typicallyrnstopped returning consumers’ phone calls and emails. In the end, many consumersrnlearned that the defendants had not contacted their lenders or obtained anyrnmeaningful relief for them. Ultimately, homeowners across the country lostrnthousands of dollars each and suffered significant economic injury, includingrnlosing their homes.</p

The CFPB is targeting loanrnmodification operations that attempt to disguise their false promises of reliefrnfor struggling homeowners with claims that they are performing legal work orrnare a law firm. The Bureau is also particularly concerned with schemes thatrnattract victims with false claims that they are endorsed by or represent therngovernment. These tactics are used by mortgage relief scams to attract victims,rnadd credibility to their schemes, or exploit certain legal exemptions for thernpractice of law.</p

CFPB sought an injunctionrnagainst National Legal Help Center and its principals Najia Jalan and RichardrnK. Nelson on December 3.  The twornCalifornia residents appear to have targeted consumers in all 50 states,rnfalsely claiming they would provide legal representation even though thernindividual defendants are not attorneys and consumers received no actual legalrnrepresentation.  They also falsely claimed that, for a fee, they couldrnhelp consumers get benefits from government-affiliated programs including thernnationwide mortgage servicing settlement and that they were associated with thernIndependent Foreclosure Review program overseen by the Office of thernComptroller of the Currency (OCC) and the Federal Reserve. . The accusedrnwere initially brought to the attention of CFPB by the Office of the SpecialrnInspector General for the Troubled Asset Relief Program and Treasury’s Officernof Financial Stability.</p

Action was brought against thernGordon Law Firm and California residents Chance Edward Gordon and AbrahamrnMichael Pessar and their companies last July. The CFPB alleges they arernresponsible for operating a network of mortgage loan modification businessesrnthat targeted consumers in over 25 states. The defendants allegedly gainedrnhomeowners’ trust by using Gordon’s “law firm” status and led consumers tornbelieve that a law firm was working with their banks and mortgage companies tornmodify mortgage loans or provide foreclosure relief, while the defendantsrntypically failed to deliver relief.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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