Orlando Mortgage Blog

FTC and 23 States Launch Massive Crackdown on Loan Mod Scams

By James Comtois
July 22, 2009

As part of a massive federal-state crackdown on loan modification scams, the Federal Trade Commission, with the help of 24 other federal and state agencies, filed a total of 189 lawsuits and cease-and-desist orders across the country against companies and individuals offering allegedly fraudulent loan mod services.

The nationwide sweep of fraudulent loan mod consultants, announced at a press conference held in Los Angeles last Wednesday led by FTC chairman Jon Leibowitz and California attorney general Jerry Brown, is part of Operation Loan Lies, a coordinated national law enforcement effort to crack down on foreclosure rescue and mortgage modification scams. Twenty-three state attorneys general and other agencies are participating in the operation.

The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the commission has brought since April.

The FTC also released "Real People, Real Stories," a three-and-a-half-minute video about keeping one's home. It features people targeted by foreclosure rescue scammers sharing lessons learned from their experiences. The FTC is distributing the video and a version in Spanish, to more than 5,000 housing counseling and consumer protection organizations around the country and posting them at http://www.ftc.gov/yourhome and http://www.youtube.com/ftcvideos.

"Some of these scammers brand their product to make them look official," said Mr. Leibowitz. "People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company."

As part of Operation Loan Lies, the FTC and the states of California and Missouri charged that U.S. Foreclosure Relief falsely claimed years of experience and a high success rate and promised quick results. Instead, homeowners paid the defendants thousands of dollars for services they never received. The FTC also charged the defendants with violating the FTC's Do Not Call Rule by calling consumers on the national Do Not Call Registry. The court barred the practices and froze the defendants' assets, pending a hearing.

In addition, Lucas Law Center allegedly used an attorney to circumvent state prohibitions against receiving a fee before providing any services. The defendants charged up to $3,995 in advance. In addition to falsely representing that they would obtain mortgage loan mods, the defendants told some homeowners to stop paying their mortgage in order to pay the defendants' fee. Consumers obtained promised refunds only after repeated complaints to the Better Business Bureau, the California AG and the State Bar of California. The court barred the practices and froze the corporate defendants' assets, pending a hearing.

Loss Mitigation Services marketed primarily through direct mail solicitation. The defendants allegedly targeted consumers whose mortgage payments have increased, who have made late payments, and whose homes were in foreclosure. They charged up to $5,500 in advance and promised that a loan mod was assured or virtually assured if consumers hired them. The defendants also misrepresented that they were affiliated with the consumer's lender or mortgage servicer. Some of their customers lost their homes while waiting for the promised results.

The FTC alleged that Coeur d'Alene, Idaho-based Apply2Save charged consumers upfront fees of up to $995, claiming they could obtain a loan mod in 30 to 90 days when they did not obtain loan mods for most consumers and were unable to stop foreclosures. Steven Curtis Lux, the former vice president of sales for Apply2Save, paid the state of Idaho $50,000 as part of a settlement agreement. The settlement agreement with Mr. Lux prohibits him from engaging in mortgage modification and loan broker activities in the state of Idaho. The Idaho AG's office plans to distribute restitution to victims later this year.

Also at the press conference, AG Brown added his office has filed legal action against 21 individuals and 14 companies who allegedly ripped off thousands of homeowners desperately seeking mortgage relief.

One company, Irvine, Calif.-based U.S. Homeowners Assistance, is accused of claiming to be a government agency and bilking dozens of homeowners out of thousands of dollars. AG Brown is also suing Home Relief Services LLC, its executives, the Diener Law Firm and its principal attorney for allegedly charging homeowners more than $4,000 in upfront fees and failing to provide any loan mod services.

Representatives from the previously mentioned alleged scam companies could not be reached for comment.