Mortgage Assistance Relief Services (MARS) Rule
The Federal Trade Commission (FTC) published the Mortgage Assistance Relief Services (MARS) final rule on Dec. 1, 2010 directed at companies (including attorneys) that offer loan modification services to consumers for a fee.
In the midst of America’s foreclosure crisis, an illicit industry of mortgage modification scams began making money (millions) by charging distressed homeowners upfront fees on the promise that they could obtain mortgage modifications for those homeowners, often doing little to nothing to actually assist the homeowners.
Federal regulators took notice and enacted laws to make it illegal in every state for mortgage assistance relief providers to charge homeowners a fee for mortgage modification services before actually obtaining mortgage modifications for those home owners. 12 C.F.R. Part 1015 (2012).
Case in point – the Hoffman Law Group (HLG) generated millions of dollars in illegal upfront fees by convincing consumers to pay for the opportunity to be included as a plaintiff in so-called “mass joinder” lawsuits against their mortgage lenders. HLG charged an upfront fee of $6,000, followed by a $495 monthly fee. HLG mislead thousands of consumers in joining frivolous lawsuits that were rejected by the courts.
The FTC promulgated the MARS Rule to prohibit unfair and deceptive acts and practices with respect to mortgage loan or foreclosure relief services. 16 C.F.R. Part 322. Congress transferred rule making authority to the CFPB, which recodified the Rule as 12 C.F.R. Part 1015, and designated it “Regulation O.” The CFPB has authority to enforce Regulation O, as well as the prior MARS Rule, pursuant to 12 U.S.C. §§ 5538(a).
HLG violated the MARS Rule/Regulation O by collecting fees before obtaining a loan modification; inflated success rates of obtaining a loan modification; duped consumers into thinking that they would receive legal representation; and discouraged consumers from talking to their lenders, and from making their mortgage payments.
A final judgment was granted against HLG in the amount of $27.7 million dollars – the full amount of illegal fees paid by consumers – and $10 million in civil penalty.