The Lawyers Committee s PreventLoanScams.org and national Loan Modification Scam Database. Fannie Mae Training November 15, 2012

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1 The Lawyers Committee s PreventLoanScams.org and national Loan Modification Scam Database Fannie Mae Training November 15, 2012

2 LMSPN s Four Components Support Education & Enforcement Media Outreach Working Group Other Counseling Agencies Database Working Group Federal, State & Local Agencies Educate public on foreclosure rescue & loan modification scams Gather complaints phone, online & paper Analyze information in centralized national database Share information with agencies, market participants to prosecute, stop scam activity

3 Get the Facts! Go to

4 We Inform the Public about State Laws and Resources

5 We Inform the Public about Actions Against Scammers

6 We Sue Scammers Lawyers' Committee Files Suit and Obtains Temporary Restraining Order Against Scammers San Diego, CA (Oct. 11, 2012) - The Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) has filed a lawsuit in Riverside County, California against a network of for-profit loan modification companies on behalf of 16 homeowners from California and five other states. The suit alleges that defendants defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising to obtain for substantial upfront and monthly membership fees much-needed mortgage modifications on the homeowners behalf, but consistently failing to deliver results. Plaintiffs also sought and obtained a temporary restraining order against the defendants enjoining their illegal operations. Attorneys in the San Diego office of Latham & Watkins LLP are providing pro bono counsel on the case. The complaint alleges that the loan modification scam in this case is operated by multiple corporate and individual defendants, managed by principals Michael Wayman and Don Brokaw. The corporate defendants named are Certified Financial Protection Group, LLC, Financial Hope for America, Inc., Safehouse 911, LLC, d/b/a Safehouse Professional Mortgage Restructuring 911, and U.S. Financial Advantage, all of which are California companies. The case, Cox, et al. v. Certified Financial Protection Group, et al., (No. RIC ) was filed in California Superior Court in Riverside County and seeks monetary damages, including those related to the illegal upfront and monthly membership fees paid by plaintiffs, and injunctive relief to put a halt to the deceptive practices of the named defendants. [Click Here to View Complaint] Plaintiffs additionally sought a Temporary Restraining Order (TRO) against defendants, which Judge Daniel Ottolia of the Riverside County Superior Court granted on October 9. The TRO will remain in effect until the Preliminary Injunction Hearing, which is set for November 29, 2012, where the court will then rule on the issuance of a Preliminary Injunction. Cox v. Certified Financial Protection Group is the Lawyers Committee s ninth loan modification scam lawsuit and second in California. **** 6

7 LMSPN Fraud Data - Over 27,000 Reports Self-Reported Submitted by homeowner, family member or friend, or counselor/attorney Collected from all fifty states and D.C.

8 How are complaints gathered? Over the phone through a dedicated team of Counselors HOPE (4673) Online and links on partner webpages In Person Counseling Sessions

9 Permissions asked of every homeowner at the end of the online form

10 This 2-pg form is available for download in English, Spanish, Chinese, Korean, Vietnamese. Look under Get Involved Tab on preventloanscams.org

11 Again, Permissions are Required to Process Reports

12 Increase in out of state reports, attorney reports More discrete, indirect services doc prep and submission; attorney referral; access to HHF, settlements Fake HUD Approved status Recent scam trends Due to state laws, FTC s in state attorney mandate? Trying to avoid appearance of upfront fee?

13 Resources are Part of the Problem and the Solution Problems Referring homeowners to 3 rd parties Marketing homeowner resources w/out fraud prevention messaging Confusion on Internet Lack of responsiveness Opportunities Clean up White List if there is one; close collaboration with KNOWN counselors; clear messaging Incorporate anti-fraud warnings Bid up keywords, optimize your sites Dedicated teams

14 MARS Rule From ftc.gov, A Compliance Guide for Lawyers Lawyers who offer mortgage assistance relief services need to know that the Federal Trade Commission (FTC), the nation s consumer protection agency, has issued a regulation affecting how these services can be marketed and provided: the Mortgage Assistance Relief Services (MARS) Rule. Because attorneys are subject to state requirements that duplicate much of what the Rule requires, the Rule has provisions that specifically address the practices of attorneys who provide these services. ARE ATTORNEYS COVERED BY THE MARS RULE? In general, attorneys are not covered by the MARS Rule if: 1. They provide mortgage assistance relief services as part of the practice of law; 2. They are licensed to practice law in the state where their client or their client s home is located; and 3. They comply with all relevant state laws and regulations concerning attorney conduct. 14

15 MARS Rule fully in effect as of Jan 31, 2011 from January 1 January 31, 2011, 871 reports: 21.1% of January 2011 reports allege that an attorney or legal representation was part of the scam (check box); 20% of the reports allege scam cos. with law in the company name. from December 1 December 31, 2011, 552 reports: 23.7% (+2.6%) of December 2011 reports allege that an attorney or legal representation was part of the scam (check box); 25.7% (+5.7%) of the reports allege scam cos. with law in the company name. 15

16 MARS Rule fully in effect as of January 31, 2011 from January 1 January 31, 2011, 871 reports: In #1 scam reporting state, California: 28.2% reports allege scams by a CA co. 30% of these CA alleged scammers are reported to be lawyers or legal in nature only 16.8% homeowners reported living in CA. 16

17 MARS Rule fully in effect as of January 31, 2011 from December 1 December 31, 2011, 552 reports: In #1 scam reporting state, California: 40.4% (+12.2%) reports allege scams by a CA co. 34% (+4%) of these CA alleged scammers are reported to be lawyers or legal in nature. Only 18.6% (+1.8%) homeowners reported living in CA. 17

18 MARS rule From ftc.gov, A Compliance Guide for Lawyers Attorneys who don t comply with these requirements are subject to the Rule s provisions. Examples of activities that likely could cause attorneys to lose their exemption include: Allowing their name to be used in solicitations to clients without actively providing legal services in connection with mortgage assistance relief services; Misrepresenting any material aspect of their legal services, including the likelihood they ll get a favorable result, an affiliation with a government agency, or the cost of their services; Sharing legal fees for MARS-related services with non-attorneys; Helping non-attorneys engage in the unauthorized practice of law; Failing to keep clients reasonably informed about their matters, including the potential for adverse outcomes; Failing to work diligently and competently on behalf of their clients that is, not making reasonable efforts to get mortgage assistance relief; and Engaging in a widespread telemarketing operation staffed by non-attorneys. 18

19 MARS Rule From ftc.gov, A Compliance Guide for Lawyers WHAT ABOUT COLLECTING LEGAL FEES? Under the Rule, attorneys can t withdraw fees in the client trust account before earning the fee or incurring the expense. To maintain their exemption from the Rule s ban on upfront fees, attorneys must comply with all state requirements related to use of client trust accounts. Laws and regulations for attorneys vary by state, but examples of activities that likely could cause attorneys to lose their exemption include: 1. Withdrawing money from a client trust account before the attorney earns fees or incurs expenses; 2. Front-loading fees for mortgage relief assistance services to expedite the withdrawal of funds from a client trust account; 3. Failing to keep complete records of transactions associated with a client trust account; 4. Failing to notify a client of a withdrawal so that he or she has an opportunity to review the transaction and, if necessary, contest it; or 5. If a client contests a withdrawal, failing to keep those funds separate from other clients and attorneys funds. 19

20 We maintain a Centralized Database of Complaints to Support Enforcement Actions and Research The Lawyers Committee For Civil Rights Under Law created a central database that is gathering scam complaints from all 50 states and D.C. How to File a Complaint: Online: Phone: (888) 995-HOPE (-4673) Local hotline # can be added as well Mail, Events, Counseling Sessions (paper complaint form) Information can be searched and filtered using multiple criteria and scams can be tracked across the country. Data and reports can be accessed by the public and Network Partners with varying levels of access.

21 How LCCRUL Shares Complaints with Enforcement Officials: Government enforcement agencies can be provided log-ins permitting full access to complete complaints within the Database Complaints are uploaded monthly to the FTC s Consumer Sentinel Database Dedicated reports are provided to impacted agencies Periodic Hot List of alleged scammer names is provided monthly to agency database users

22 The Lawyers Committee s secure national Loan Modification Scam Database is a valuable nationwide resource: 313 officials from over 75 local, state and federal enforcement agencies including SIGTARP, FTC, US Secret Service, HUD OIG, FHFA OIG, state AGs and state banking regulators - and 91 representatives from 42 of the LMSPN s partner organizations now have credentials to search the Database. 22

23 Nationwide Reports in the LMSPN Database as of November 1, 2012 As of November 1, 2012 there were 27,328 completed reports of alleged loan scams submitted by U.S. homeowners into the Lawyers Committee s national Loan Modification Scam Database, representing over $64.6 million in losses. 85.9% (23,481) of the homeowners identified their race: 48.6% White (11,402) 42.9% Latino and African-American (4874 and 5192, respectively).

24 Questions? 24

25 For General Support Yolanda McGill, Senior Counsel, Fair Housing & Fair Lending, Lawyers Committee for Civil Rights Under Law Phone: