The U.S. Federal Trade Commission is taking action against unsanctioned websites that prey on embattled homeowners and claim to be affiliated with the government.

Most recently, the agency has charged business owner Christopher Mallett with multiple violations of the Federal Trade Commission Act for misrepresenting his affiliations with federal agencies, misrepresenting that the services advertised on his websites were government-approved and making deceptive debt relief claims. The FTC further charged that his deceptive claims violated the FTC’s Telemarketing Sales Rule and Mortgage Assistance Relief Services Rule.

The FTC claims Mallett’s business titles include deceptive wording such as: Department of Consumer Services Protection Commission, U.S. Debt Care, World Law Debt, U.S. Mortgage Relief Counsel, gov-usdebtreform.net, worldlawdebt.org, usdebtcare.net and FHA-homeloaninfo.

One website owned by Mallett promises that the “Counsel” would direct consumers to “officials licensed with the National Mortgage Licensing Service (NMLS), persuant [sic] to the SAFE act of 2008 and features a picture of the U.S. Capitol building,” the agency claims. Some of the sites even promised consumers that the company was capable of significantly reducing debt, citing exact percentages. The FTC maintains that it is in no way affiliated with any of Mallett’s ventures and that his debt and mortgage reduction claims are not true.

The problem of mortgage relief scams is one that hits close to home for many African-Americans. The Center for Responsible Lending reports that overall, African-Americans saw more home foreclosures than any other race since the housing crisis began. The center also says that although non-Hispanic whites represent the majority of at-risk borrowers, African-American and Latinos are more likely to be at imminent risk of foreclosure — an issue exacerbated by the influx of fraudulent mortgage relief schemes.

Nearly half of all mortgage loan modification scam victims are African-Americans and other people of color, according to statistics from the Homeownership Preservation Foundation, an independent national nonprofit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure. 

“Repeated studies have shown that minorities were disproportionately targeted for predatory lending during the housing boom, and we have compelling evidence indicating that minorities are bearing the brunt of an unusually high percentage of mortgage scams,” said Colleen Hernandez, HPF’s CEO.

However, despite the FTC’s attempts at tracking down mortgage scammers, the agency’s 2011 budget removes federal funding for housing counseling, a component that advocates say is key.

“Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners,” Ms. Hernandez said. “Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered.”

While the FTC cuts back on education, the Department of Housing and Urban Development is ramping up efforts to warn homowners about shady deals. Earlier this year, the agency launched a campaign to engage homeowners in helping to locate and shut down scammers who target African-Americans and Latinos.

(Photo: Justin Sullivan/Getty Images)