The federal government has shut down 85 alleged online loan modification scams, and secured the cooperation of Google to stop the purportedly false advertising by those web operations.
The government agency responsible for supervising the use of Troubled Asset Relief Program (TARP) funds recently targeted businesses that promise to cut a customer's mortgage payments through the Home Affordable Modification Program (HAMP), a program funded by TARP that provides relief to beleaguered homeowners. TARP is the $700 billion government fund, signed into law in 2008, that allows the government to buy up toxic securities from troubled banks.
In cooperation with the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), who is conducting the investigation, Google suspended advertising relationships with more than 500 advertisers linked to the alleged scams.
Google and SIGTARP both declined to comment on the investigation because it is ongoing.
Mortgage fraud, which includes mortgage assistance relief scams, has spiked in the last year, rising by 31 percent alone in the first quarter of 2011 and leaving already distressed homeowners in worse financial condition.
The alleged scammers who hawk mortgage assistance relief falsely claim that they are affiliated with the government or certain lenders and promise to help modify a homeowners' loan. But the companies, which have managed to secure web addresses like usbankloanmodification-gov.info and mortgagehelpgov.us in the past, rarely deliver on their promises, the government says.
The Federal Trade Commission prohibits mortgage assistance relief companies from accepting money from a homeowner until he accepts an offer from his lender, but many homeowners don't know this and pay charges to the companies upfront.
Some of the purported schemes instruct homeowners to send mortgage payments to the mortgage assistant company instead of the bank, while others ask homeowners to transfer their property deeds, AOL Real Estate has reported.
Along with marking a new effort by the government to crack down on mortgage fraud, the investigation also renews suspicion of Google as accepting advertisers who offer bogus deals and services.
Google's third-party ad network, AdSense, and Google's search engine advertising platform, AdWord, have been criticized for displaying illegal ads. And the internet giant recently paid $500 million to settle a Justice Department investigation of its role in displaying illegal pharmacy ads.
Other false advertisements that Google has displayed include those that: bundle spyware; charge for products that are typically free; promise free service but actually charge a fee; and promote products or tools that are in violation of copyright laws.
To avoid getting duped by mortgage scammers, follow these tips from AOL Real Estate:
1.Avoid businesses that advertise with fliers or solicit door-to-door.
Any company that goes as far out of its way as to show up at your door or solicit your business through the mail should arouse some suspicion: Scammers in particular use such aggressive tactics.
2. Know what you're signing.
Scammers may ask you to sign forms that they say will give them the right to negotiate with your lender. In reality, these forms may transfer the title of your house to the scammers.
3. Be wary of the rent-to-buy scheme.
Avoid any program that asks you to surrender the title of your home so that you can remain in it as a renter -- even if the company "guarantees" that you can buy back your home in the future. After acquiring ownership of your home, scammers might refinance the loan and obtain a lower rate from your lender. This allows the scammer to charge you rent that is lower than your previous monthly payment, but often makes it impossible for you to ever buy back your home.
4. Work only with a HUD-approved counselor.
Work exclusively with counselors who have been approved by the Department of Housing and Urban Development. Many of these counselors provide inexpensive services, while others offer them at no cost at all. They will never ask for upfront fees because charging such fees is illegal.
5. Hire licensed attorneys.
If you hire a lawyer, make sure that he is registered as a licensed attorney in your state. Scammers will offer to represent you in court and may even file paperwork on your behalf, only to run off with your money. Once you have initiated a case, be sure to keep copies of important documents and check the status of your case online.
6. Verify the identity of callers who claim to represent your lender.
After foreclosure proceedings begin, scammers can pull your information from databases that include the name of your lender, how much you owe and even the account number on your loan. They may then call you and quote this information in order to gain your trust. Be sure to take the person's name, telephone number and employee ID number so that you can verify the caller's identity with your lender before cooperating with them.
If you're scammed:
If you feel you're a victim of loan modification fraud, seek help by visiting the Federal Trade Commission's foreclosure scam webpage or the NeighborWorks' Loan Modification Scam Alert campaign's website.
For more details on how to avoid foreclosure rescue scams see the story of a woman who fell victim to more than one.