Feds, State Agencies Crack Down on Mortgage
Modification, Foreclosure Rescue Scams
Seniors and other consumers need to know how to
identify these scams; FTC gives examples
April 6, 2009 – The hammer came down hard
today on fraud
and deception by mortgage modification and home foreclosure rescue
companies at a joint news conference of federal officials, including
Treasury Secretary Timothy Geithner, Attorney General Eric Holder and
Department of Housing and Urban Development Secretary Shaun Donovan.
Federal Trade Commission Chairman Jon Leibowitz joined Illinois Attorney
General Lisa Madigan to announce enforcement actions and initiatives.
The FTC is seeking to halt the proliferation of
these mortgage relief scams – which target distressed and vulnerable
consumers who are delinquent or facing foreclosure – through increased
law enforcement, consumer outreach, and close coordination with federal,
state, and non-profit partners.
Leibowitz and Madigan warned consumers
about these scams and in encouraged consumers to seek out free,
HUD-approved housing counselors for help with their mortgages.
“Scammers are taking advantage of people in a
difficult situation – people who are trying to modify their home
mortgages or those who are trying to avoid foreclosure. We’re enforcing
the law against these scam artists; we’re putting others on notice that
unless they change their ways, they’re next; and we’re working with
other government agencies, non-profits, and mortgage companies to reach
out to our neighbors in distress with the details of how to get help,”
said Chairman Leibowitz.
The FTC announced five law enforcement actions
against operations using deceptive tactics to market their mortgage
modification and home foreclosure relief services, including firms that
marketed their “services” by giving the false impression they were
affiliated with the federal government.
This brings to 11 the number of loan modification
and mortgage foreclosure rescue scams brought by the FTC in the last
year. More than 20 state law enforcers also have taken actions against
companies engaged in these types of deception, including 22 brought by
Illinois Attorney General Madigan.
The FTC also announced today that it has sent
warning letters to 71 companies who may be deceptively marketing
mortgage loan modification or foreclosure rescue services. The FTC
identified these companies through a nationwide review of Internet and
other advertisements and warned these companies that their ads may
violate federal law. State law enforcers also have sent warning letters
to companies that are potentially engaging in such illegal practices,
including more than 60 warning letters sent by Attorney General Madigan.
Finally, the FTC joined forces with a wide array of
government, non-profit and mortgage industry members to launch a new
consumer education campaign to help those in financial trouble avoid
becoming the victims of a loan modification or foreclosure rescue scam.
FTC’s Law Enforcement Actions
The FTC announces five law enforcement actions
targeting perpetrators of mortgage-related scams. According to the FTC,
these schemes typically operate in the following way.
First, they use terms like “guarantee” and “97%
success rate” to mislead consumers about the mortgage modification or
foreclosure relief services they can provide; they charge up-front fees
for these “services” – fees legitimate nonprofit organizations do not
charge; and they use copycat names or look-alike Web sites to appear to
be a nonprofit or government entity.
Often, after collecting the fee, these companies do
little or nothing to help consumers. In each case described below, the
FTC is seeking, or already obtained, a temporary restraining order to
halt the defendants’ illegal conduct.
Federal Loan Modification Law Center (FedMod).
FedMod markets mortgage loan modification and foreclosure relief
services to homeowners who are in financial distress, delinquent on
their mortgages, or in danger of losing their homes to foreclosure.
According to the FTC’s complaint, FedMod charges
consumers from $1,000 to $3,000 in fees for these services, much of
which must be paid up-front, but fails in numerous instances to obtain
the promised loan modifications. In radio advertisements, the FTC
alleges, FedMod induces homeowners to call its toll-free number by
misrepresenting that it is part of or affiliated with the federal
government, although it is not.
According to the complaint, FedMod often fails to
answer or return consumers’ calls or provide updates about the status of
their loan modifications, and assures consumers that negotiations with
their lenders are proceeding when, in fact, little or no effort has been
made to contact the lender.
Bailout.hud-gov.us. According to the FTC’s
complaint, defendant Thomas Ryan used a foreign Internet registrar to
falsely register two sites – bailout.hud-gov.us and bailout.dohgov.us.
The sites were used to entice financially strapped consumers to seek
mortgage loan modification services under the guise that the services
were associated with, or were actually, the U.S. government, including
HUD and the Treasury Department.
The FTC alleges that the defendant misled consumers
nationwide. A federal district court granted the FTC’s motion for a
temporary restraining order which required the Internet Service Provider
(ISP) hosting the sites to immediately remove them from the Internet.
The FTC and the defendant stipulated to a preliminary injunction
prohibiting him from holding himself out as an agency of any U.S.,
state, or local government, or as being affiliated with any such agency.
Home Assure d/b/a Expert Foreclosure. In
this case, the FTC alleges that the defendants promise consumers facing
imminent home foreclosure that they can stop the foreclosure, regardless
of the amount the consumer owes his or her lender. The defendants are
charged with falsely claiming that they have special relationships with
lenders, have helped thousands of consumers avoid foreclosure, and will
provide a 100 percent satisfaction money-back guarantee.
They typically charge consumers an up-front fee of
$1,500 to $2,500 but, the FTC alleges, do little or nothing to help them
avoid foreclosure and fail to give refunds when foreclosures are not
stopped.
Hope Now Modifications LLC and New Hope Property
LLC d/b/a New Hope Modifications LLC. On March 24, the FTC announced
two related cases alleging that the defendants misled consumers about
their ability to provide mortgage loan modification and foreclosure
relief, and misrepresented that they were affiliated with or part of the
HOPE NOW Alliance, the non-profit, HUD-endorsed organization that is a
broad-based coalition of credit and home ownership counselors, lenders,
and other mortgage market participants. In each case, the court issued a
temporary restraining order with an asset freeze and set dates for a
preliminary injunction hearing.
The New Jersey Attorney General also filed state
court actions against both sets of defendants, and those cases are in
litigation. The FTC’s press release is available –
click here.
FTC’s Warning Letters for Potentially Deceptive
Mortgage Relief Ads
The Commission today announced that it has sent
warning letters to 71 companies that are marketing potentially deceptive
mortgage modification and foreclosure assistance programs. The letters
inform these companies that their ads may violate federal law. The ads
were identified during a nationwide surf of Internet, direct mail, and
spam advertisements that focused on ads for mortgage relief targeted at
financially distressed homeowners. These advertisements contain
potentially deceptive claims, touting guaranteed results, success rates
of over 90 percent, and claiming affiliation with homeowners’ lenders,
with the HOPE NOW Alliance, or with federal government programs.
FTC’s Consumer Outreach Efforts
The FTC announced a new education initiative to
reach borrowers directly with the help of a broad array of government,
non-profit organizations, and mortgage industry members. Through this
initiative, borrowers will receive materials about how to spot and avoid
mortgage rescue scams at housing counseling outreach centers, directly
from their mortgage companies, and online.
Joining the FTC in the effort are The HOPE NOW
Alliance, the Homeowners Preservation Foundation, and NeighborWorks
America, which are non-profit organizations that work to help distressed
homeowners get free help and counseling through HUD-certified housing
counselors, all of whom work directly with borrowers to help them stay
in their homes.
Several national mortgage companies, including
Chase Home Finance, Suntrust Mortgage, and GMAC Mortgage, will be
sending consumer education information directly to consumers through a
variety of methods, including during loan counseling sessions, in
monthly statements, in correspondence to delinquent borrowers, and on
their Web sites. Freddie Mac also is distributing consumer education
materials to its servicing partners.
In addition to the New Hope Modifications and Hope
Now Modification cases filed last month, the Commission today announced
complaints were filed against the following defendants:
FedMod – Federal Loan Modification Law
Center LLP doing business as Federal Loan Modification Law Center and
under other various other names; Anz & Associates, PLC; LegalTurn, Inc.;
Federal Loan Modification LLC; Boaz Minitzer, Nabile Anz, and Jeffrey
Broughton. The FTC thanked the Attorneys General of California and
Idaho, the Better Business Bureau (BBB) of the Southland, the Orange
County District Attorney’s Office and the Spokane, Washington BBB for
their assistance in this case. This case was filed in the U.S. District
Court for the Central District of California.
Bailout.hud-gov.us – bailout.hud-gov.us,
bailout.dohgov.us, and Thomas Ryan. This case was filed in the U.S.
District Court for the District of Columbia.
Home Assure – Home Assure, LLC, B Home
Associates, LLC, doing business as (dba) Expert Foreclosure, Michael
Grieco, Michael Trimarco, Nicholas Molina, and Brian Blanchard. The
defendants also have been the subject of law enforcement actions or
investigations by the Minnesota, North Carolina, and Florida Attorneys
General. This case was filed in the U.S. District Court for the Middle
District of Florida, Tampa Division.
The Commission vote to issue each complaint was
4-0.
NOTE: The
Commission authorizes the filing of complaints when it has “reason to
believe” that the law has been or is being violated, and it appears to
the Commission that a proceeding is in the public interest. The
complaints are not a finding or ruling that the defendants actually have
violated the law.
Copies of the documents related to these cases are available from
the FTC’s Web site at
http://www.ftc.gov and also from the FTC’s Consumer Response Center,
Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The
Federal Trade Commission works for consumers to prevent fraudulent,
deceptive, and unfair business practices and to provide information to
help spot, stop, and avoid them. To file a complaint in English or
Spanish, visit the FTC’s online Complaint Assistant at
www.ftccomplaintassistant.gov or call 1-877-FTC-HELP
(1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a
secure, online database available to more than 1,500 civil and criminal
law enforcement agencies in the U.S. and abroad. The FTC’s web site
provides free information on a variety of consumer topics at
www.ftc.gov/consumer.
