Top federal officials met this week to discuss cracking down on fraudulent mortgage relief companies that often promise services they can't provide, charge steep upfront fees and try to associate themselves with legitimate consumer-help organizations.
Federal regulators also brought their tally of groups charged with running mortgage-related scams up to 22 companies, including one New Jersey company that sent fliers to South Carolina homeowners.
The S.C. Department of Consumer Affairs has received complaints on about 30 mortgage relief companies that don't comply with the state's licensing requirements, which are some of the strictest in the country.
Before helping South Carolina residents, a mortgage relief company needs to obtain a credit counseling license, which has a rigorous application process that requires an organization to submit detailed financial statements.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
Employees also need to pass criminal background and credit checks.
Because of the tough standards, only 38 groups have such a license. But that hasn't stopped mortgage relief companies from soliciting S.C. residents, said Carri Grube Lybarker, a staff attorney for the Department of Consumer Affairs.
"Just because we have a great law in place doesn't mean that our South Carolina consumers aren't being taken advantage of," she said. "You have people who are going to break the law and don't care they're breaking the law because their business model isn't based on providing services."
On Thursday, 12 state attorneys general met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to talk about ways to curtail fraudulent operations, including alerting financial institutions to emerging schemes, stepping up enforcement actions and educating consumers.
Jon Leibowitz, chairman of the Federal Trade Commission, said he's considering banning upfront payments to companies that advertise help for troubled borrowers. South Carolina is one of 20 states that prohibit upfront fees, but a group can charge up to $50 for an initial consultation.
"Foreclosure scams cost homeowners time and money, two things you can't afford to lose when you're fighting to save your home," N.C. Attorney General Roy Cooper said in prepared remarks. "We're cracking down on foreclosure scammers who take homeowners' money but do little or nothing to help them."
S.C. Attorney General Henry McMaster, a gubernatorial candidate, was not invited to the event, according to spokesman Mark Plowden.
Federal Trade Commission officials also announced new civil charges against two companies, San Diego-based Nations Housing Modification Center and Infinity Group Services of Orange County, Calif.
The agency has filed charges against 20 other groups, including New Jersey-based Hope Now Modifications, which sent solicitations to South Carolina residents.
The complaint against Hope Now Modifications, filed in March, alleged company officials misled consumers about their ability to provide mortgage relief and then failed to provide refunds for homeowners they couldn't help, according to court documents.
The group also allegedly tried to affiliate with the HOPE NOW Alliance, a nonprofit organization that is a broad-based coalition of credit and home ownership counselors, lenders, investors, mortgage market participants and trade associations.
Some unscrupulous mortgage companies have claimed to associate with the Obama administration's Home Affordable Modification Program, an effort to reduce payments on as many as 3 million to 4 million mortgages.
"They want you to associate them with a reputable program," said Grube Lybarker. "They'll use the (phrase) 'federal stimulus package provides money' or they'll use the word 'federal' in their name."
South Carolina residents who got fliers from Hope Now Modifications reported the company to the S.C. Department of Consumer Affairs. Grube Lybarker couldn't disclose what actions the agency took but said it typically contacts the company to discuss the state's licensing requirements.