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FTC says foreclosure relief scam shut down

The Federal Trade Commission announced Thursday that a federal district court has closed down a foreclosure rescue fraud scam. The scam was but one of what may be many that Ohio resdients should be aware that exist in the current marketplace.

The FTC says the scam involved a scheme that pushed distressed homeowners to pay thousands to join alleged lawsuits against home mortgage lenders. The FTC says the schemers either neglected the pursuit of actual lawsuits, or that the lawsuits actually pusued were dismissed, leaving distressed homeowners with no relief for their money.

The scheme reportedly used the web and targeted hundreds of distressed homeowners, going so far as promising to file class action lawsuits against mortgage lenders to help people who may have been distressed, or facing a home mortgage foreclosure. The FTC says the scam raked in more than $1 million at the expense of troubled consumers.

The FTC action sought to shut down the operation, that the agency says was the first case alleging a "mass joinder" lawsuit scam. A mass joinder lawsuit is a class action proceeding that allows individual plaintiffs in similar positions to participate in a single lawsuit. The FTC says that the company in charge of the scam bilked upfront fees of $6,000 to $10,000 out of distressed homeowners to stop mortgage foreclosures and seek damages.

The company reportedly ran a separate scam offering to investigate lenders, saying that the company would probably find irregularities in lending or servicing practices that would allow homeowners to get a loan modification of some sort. The FTC says that the firm would charge between $795 and $1,595 for the mortgage lender investigation scam.

A federal judge shut the operation down and a receiver was appointed as the FTC continues to pursue the company in court.

The foreclosure crisis and housing market collapse have made many American homeowners vulnerable. Officials estimate that roughly 11 million Americans have underwater mortgages--a subject discussed a number of times on this blog in recent months.

Source: Reuters, "FTC says it halted mortgage relief scam," Diane Bartz, Mar. 22, 2012

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