Scam Alert: Don't Pay to Join Mortgage 'Relief' Lawsuits

It's a sad day when consumer protection officials find it necessary to warn consumers about lawyers but it looks like that day has arrived. The Washington state attorney general is cautioning homeowners about paying to participate in a “mass joinder” lawsuit promising mortgage relief.

The lawyers and marketers pushing these suits charge upfront fees and frequently promise fast results. In reality, litigation is time-consuming and even a qualified attorney can’t guarantee the outcome of a case. Moreover, representatives of a legitimate class-action suit would not ask consumers for money to be a part of the suit.

Homeowners should be especially skeptical of solicitations from out-of-state firms, which may not be familiar with the laws in other states and may not be licensed to practice there – or anywhere, for that matter.

The Federal Trade Commission recentlybanned mortgage relief companies from collecting fees until homeowners have received an acceptable written offer from a lender or servicer. Attorneys are generally exempted from the rule but are required to place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

he Washington attorney general’s Office is also seeing companies pushing forensic mortgage loan audits and services with titles like “pre-litigation monetary claims program.” So-called loan auditors, often backed by attorneys, offer to review your loan documents to determine whether your lender complied with state and federal laws. They claim they can use the audit report to avoid foreclosure, accelerate the loan modification process or reduce your loan principal.

The Federal Trade Commissionwarnsthat there is no evidence that forensics loan audits will help a homeowner obtain a loan modification or other foreclosure relief, even if the audit is conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.

The FTC also notes that some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.