Mortgage loan modification service providers under fire for violating Fair Housing Act

By Kerry Goff | Nov 3, 2016

SAN FRANCISCO -- The U.S. Department of Justice has filed a lawsuit alleging that several mortgage loan modification service providers violated the federal Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) by intentionally discriminating against Hispanic homeowners by targeting them for predatory mortgage loan modification services. 

The service providers also were accused of allegedly interfering with the homeowners' ability to receive financial assistance to maintain their homes.

The defendants named in the lawsuit are The Home Loan Auditors LLC, Century Law Center LLC, SOE Assistance Center Inc., Spieker Law Office. The plaintiffs are Omar Alcaraz, Araceli Castro, Oralia Gutierrez, Hortencia Leon, Raul Luna, Elena Ramirez and David Spieker.

The complaint, which was filed in the U.S. District Court for the Northern District of California, alleged that the defendants engaged in a pattern or practice of marketing to and encouraging Hispanic homeowners to pay approximately $5,000 for unnecessary and ineffective loan audits.  

“The defendants told the homeowners that audits were essential for a loan modification, but in fact the audits had no impact on the loan modification process and provided no financial benefit,” according to an ENews Park Forest article. “As part of their advertised loan modification service, the defendants encouraged their clients to stop making mortgage payments and instructed them to cease contact with their lenders. This conduct resulted in many homeowners defaulting on their mortgage payments and ultimately losing their homes.”

This lawsuit arose as a result of complaints filed with the U.S. Department of Housing and Urban Development (HUD) by two of the defendants’ former clients. Those who filed the suit elected to have the case heard in federal court and HUD referred the case to the U.S. Justice Department.

“Intentionally targeting any community or person with predatory mortgage services because of their ethnicity or national origin violates federal law, harms working families and hurts our entire economy,” Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, said in a statement. “The defendants in this case tried to exploit Hispanic communities and homeowners already suffering from abusive, discriminatory financial practices during the Great Recession that drove the American housing market into crisis and our economy into freefall.  The justice department’s lawsuit serves as a stark reminder and sends a clear message that we will work tirelessly to ensure that all homeowners can access mortgage services free from discrimination.”

HUD officials also found the justice department’s crackdown on such discriminatory behavior as necessary because it exploits those who need help the most.

“Hispanic families struggling to stay in their homes do not need empty promises that make their housing and financial situation worse,” Gustavo F. Velasquez, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, said in a statement. “HUD is gratified that the department of justice is taking action against individuals and companies that victimize homeowners because of where they come from or because they speak Spanish or other languages.”

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Organizations in this Story

U.S. Department of Housing and Urban Development U.S. Department of Justice U.S. District Court for the Northern District of California, San Jose Division

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