Karma Comes to Mortgage Relief Scams

Taking advantage of distressed homeowners is reprehensible.  Recently, one group running mortgage relief scams got a taste of what it feels like to lose money when the Southern District of Florida, a federal court, entered a judgment totally over $27 million against a group of entities accused of ripping off homeowners.mortgage relief scams

Mortgage Reilef Scam Background

As we’ve discussed in earlier blogs, homeowners that have fallen behind on their mortgages do have options that range from defenses to foreclosure to negotiating with the lender for new mortgage terms or another mutually agreeable solution like a deed in lieu of foreclosure.  Law firms, like Jacksonville foreclosure defense lawyers, Adam Law Group, can help homeowners understand and take advantage of the best option for the homeowner.  It’s a process that takes time, analysis, and work by the firm.
Unfortunately, there are some unscrupulous individuals and companies that use the distress of homeowners behind or at risk of falling behind on their mortgage payments to con the homeowners into mortgage relief scams – and out of their money.  The Southern District court found that Hoffman Law Group and five associated companies  (jointly “The Hoffman Companies”) were among these unscrupulous companies and individuals.

 The Mortgage Relief Scam Lawsuit

The lawsuit against the Hoffman Companies was brought by the Consumer Financial Protection Bureau (CFPB) and the State of Florida.  The CFPB and Florida brought a few different legal claims under Florida and federal law relating to their mortgage relief scams:

  • Violation of the Consumer Financial Protection Act;
  • Violation of the Omnibus Appropriations Act and “Regulation O” (Mortgage Assistance Relief Services Rule);
  • Violation of the Florida Deceptive and Unfair Trade Practices Act; and
  • Civil Theft under Florida Statutes 812.035(5), 812.014

The facts supporting each claim were similar, the suit alleged that the Hoffman Companies used false promises regarding likely results and outcomes and a promise of legal representation to trick homeowners into paying a $6,000 up front fee and an ongoing $495 monthly service fee.  In exchange for these fees, most homeowners received very little if any benefit.

 The Companies’ Response

In response to the lawsuit, the Hoffman Companies did nothing.  They simply did not respond to the allegations.  When a defendant doesn’t respond to a lawsuit, the Federal Rules of Civil Procedure allow the court to enter a default judgment against the non-responding party upon the opposing party’s request.  The court must then determine the amount of damages due.
In the case of the Hoffman Companies, the court did enter a default judgment and determined that damages were over $27 million calculated by adding: (1) $11, 730, 579, the full amount that the Hoffman Companies obtained from consumers during the companies’ life; (2) $10 million as a penalty under federal law to be paid to the CFPB; and (3) $6 million as a penalty under Florida law to the State of Florida.
The full default judgment, which further explains the amounts and the Florida and federal law violations can be found here.

 Mortgage Relief Scams Implications

This case is good for consumers.  It demonstrates that Florida and federal authorities are taking mortgage relief scams seriously and taking a hard stance against deceptive companies that prey on the vulnerable.  Hopefully, it will help deter some would-be wrongdoers and help homeowners have some feeling of vindication.
The judgment amount of $27 million is headline worthy, but unfortunately, of that, only about $650,000 is likely to be collected and of that, the defrauded homeowners are likely to see very little because administrative expenses will be deducted and the remaining amount, assuming there is enough, will be divided among the over 2,000 defrauded homeowners.
Homeowners should be cautious before entering into any agreement and do some research on the company.  The Florida Attorney General’s website provides a number of good explanations and resources related to avoiding mortgage relief scams.  It’s a good jumping off point for homeowners, current and future, looking to protect themselves.