WASHINGTON, July 23 (Reuters) - U.S. regulators and 15 states announced a wave of lawsuits on Wednesday against law firms and mortgage assistance companies they said have scammed borrowers since at least 2011 by falsely promising home loan modifications and other foreclosure relief.
The U.S. Consumer Financial Protection Bureau and Federal Trade Commission together filed nine lawsuits against people and companies they said misled consumers about their eligibility for modifications and inflated the amounts borrowers could save.
"Not only do they collect hundreds or thousands of dollars in upfront fees from homeowners and then not deliver any results, but they make the loss of people's homes even more likely by telling consumers not to pay their mortgage or to talk to their lenders or servicers," Katie Fallow, the FTC's deputy director for consumer protection, said on Wednesday.
The companies, some of which have already ceased operations, also violated rules that ban relief providers from receiving payment before the borrower reaches a modification agreement with the bank, the regulators said.
State attorneys general also are bringing a total of 32 legal actions as part of the sweep, which the agencies are calling "Operation Mis-Modification."
After the 2007-2009 financial crisis, millions of Americans were unable to make payments and found themselves facing foreclosure. Struggling borrowers sought to change the terms of their loans and lessen payments.
Regulators say some of the service providers that cropped up offering relief actually took advantage of desperate consumers.
Some consumers were unable to reach anyone at the company after they paid an initial fee. Others believed they were paying for legal representation, but never spoke to a lawyer, said Steve Antonakes, deputy director of the consumer bureau.
"These companies are nothing more than fronts for scammers," Illinois Attorney General Lisa Madigan, who filed lawsuits against two Chicago-area companies, said in a statement.
Attorneys general from Arizona, Delaware, Florida, Indiana, Kansas, Louisiana, Maryland, Michigan, New Mexico, New York, North Carolina, Ohio, Washington and Wisconsin filed related lawsuits.
(Reporting by Emily Stephenson. Editing by Andre Grenon)