Inside Google

The Treasury Department shut down 85

alleged online mortgage scams that advertised with Google to target struggling homeowners.

The scammers allegedly preyed on homeowners seeking to lower their mortgages through a program created by the Troubled Asset Relief Program, or TARP, created by the federal bailout in 2008. The TARP program, known as the Home Affordable Modification Program, offers homeowners who are having difficulty paying their mortgages a way to alter their payments to ease the burden.

In a press release today, the Treasury Department alleged that scammers charged those homeowners fees for lowering mortgage payments, something the companies never actually did. And the agency alleges that the companies lured victims with online ads placed using Google tools. Scammers targeted unsuspecting victims by buying key words from Google for search advertising.

“Many homeowners who fall prey to these scams, initially do so through these Web banners and other Web advertising,” Christy Romero, Deputy Special Inspector General for the Troubled Asset Relief Program, said in an interview.

She declined to say if the agency would hold Google accountable for taking ads from rogue mortgage companies, or whether it would seek to fine the Web giant. The agency said that, at its request, Google suspended advertising relationships with more than 500 Internet advertisers and agents associated with the 85 alleged online mortgage fraud schemes and related deceptive advertising.

A Google spokeswoman declined comment.

One Google critic, the public advocacy firm, Consumer Watchdog, wants Google held accountable. It put out a report in February blasting Google for taking these fraudulent ads.

“Google’s ethos has been to look the other way when its advertisers do evil things,” said Consumer Watchdog president Jamie Court. “This a very important warning to Google and other web advertisers that they cannot see no evil and hear no evil if they are raking in big advertising bucks from the evil doers.”

He suggests that Google be fined in order to help compensate the victims of these scams. It’s unclear how much money Google has taken in from the ads.

In August, Google agreed to pay $500 million to settle claims that it took ads from rogue online Canadian pharmacies in violation of federal law. In that case, the Department of Justice found that Google had knowingly accepted ads from companies that were illegally selling prescription drugs in the United States.

The settlement was one of the largest ever in the United States according to the Justice Department. The total covered the gross revenue received by Google as a result of Canadian pharmacies advertising through Google’s AdWords program, and the gross revenue made by those pharmacies from their sales to U.S. consumers.

In the mortgage case, scammers often sought up-front fees to assist with applying for the mortgage modification program, even though the program is free. The rogue companies also encouraged homeowners to stop paying their mortgage and to cease all contact with their lender. Then, they sought to get homeowners to send them mortgage payments, transfer property deeds and release sensitive personal financial information.

To appear more legitimate, the scammers often claimed to be affliated with the U.S. government, used a government seal on their sites, and sometimes adopted government agency-sounding names.

While shutting down the advertising relationships with Google won’t end the scam, it will put a dent in the rogue operators ability to target new victims.

“Sometimes, when we catch these con-artists, it’s too late to help homeowners,” Romero said. “We decided to target the people behind these deceptive ads.”

She added that the agency’s investigation is ongoing.