A rash of federal, state and local lawsuits have been filed against a host of loan modification firms. Civil litigation has been filed in Missouri, New York and Ohio, while a criminal action was filed in California.
Among several issues discussed at an anti-fraud meeting attended by Housing and Urban Development Secretary Shaun Donovan, Federal Trade Commission Chairman Jon Leibowitz and attorneys general from 12 states on Sept. 17 was loan modification fraud.
The day of the meeting, the FTC announced two new law enforcement actions in a continuing crackdown on loan modification scams.
A lawsuit was filed by the FTC on Sept. 15 in U.S. District Court for the District of Columbia against Nations Housing Modification Center and its principals, according to a copy of the complaint. The defendants are accused of violating the FTC Act and the FTC's Telemarketing Sales Rule by misrepresenting themselves as a federal government agency.
In addition, the San Marcos, Calif., company allegedly touted a 90 percent success rate and promised to obtain modified payments for a $1,500 up-front fee and a $1,500 fee due two weeks later. The defendants also allegedly claimed that they had attorneys and forensic accountants on staff.
"In fact, the FTC alleges that very few homeowners got modifications, the defendants accepted advance fees for services from all applicants, and they had neither lawyers nor accountants on staff," the agency said.
On Aug. 26, the FTC filed a complaint in U.S. District Court for the Central District of California Southern Division against Irvine, Calif.-based Infinity Group Services and its president, Kahram Zamani. The FTC claims Infinity offered a money-back guarantees that it would obtain a modifications but then failed to respond when borrowers called about refunds.
The commission said it has filed 22 of these cases since the housing crisis began. Leibowitz advised borrowers to avoid firms that require large advance fees, guarantee modification results or ask to collect mortgage payments.
The FTC said it obtained a stipulated federal court order prohibiting Lucas Law Center and its principals from charging up-front fees, which were as high as $3,995, or misrepresenting their services. It announced a preliminary injunction against United Credit Adjusters Inc., The Loan Modification Shop, Ltd. and principals of the two companies pending a trial. In addition, a preliminary injunction was obtained against Loss Mitigation Services -- which charged up-front fees up to $5,500 -- and its principals pending a trial.
An amended complaint was filed against Hope Now Modifications LLC and added Michael Kwasnik, Esq. and The Law Firm of Kwasnik, Rodio, Kanowitz & Buckley P.C. as defendants.
New York Attorney General Andrew M. Cuomo filed a lawsuit against American Modification Agency Inc., an Aug. 13 news release stated. Cuomo claims Amerimod collects illegal up-front fees, fails to provide promised refunds and "typically falls short on its promises." It also allegedly misleads borrowers about its services.
The state is looking for refunds and damages and to "shut down the company's New York operations."
Premier Credit Services of Kansas City and its principals, Michael Eads and Angela Eads, were sued by Missouri Attorney General Chris Koster, an August announcement indicated. The defendants were accused of illegally collecting up-front payments and falsely promising to obtain loan modifications with lower rates or payments.
In California, Rene Alverez was arrested for allegedly collecting more than $2 million in advance-fee payments with promises that his company, M & R Contemporary Solutions Inc., would purchase the borrowers' mortgages on the secondary market and then modifiy the loans, according to a recent press release from the Santa Clara County District Attorney's Office. But the county claims numerous ex-employees of M & R have stated that no borrowers were ever helped.
An arrest warrant on the same charges was issued for Alverez's alleged accomplice, Mariano Ortega.
Ohio Attorney General Richard Cordray is in the discovery process of lawsuits he plans to file against mortgage servicers who, among other things, charge excessive fees for handling loan modification requests, Reuters reported.
Federal Trade Commission v. Federal Housing Modification Department, Inc. also doing business as Nations Housing Modification Center and Loan Modification Reform Association, Michael A. Trap, Glenn Rosofsky, and Bryan Rosenberg.
Civil Action No. 09-CV-01753, FTC File No. 092 3124, Sept. 15, 2009 (United States District Court District of Columbia)
Federal Trade Commission v. Infinity Group Services, et al.
SACV09-00977 DOC (MLGx), Aug. 26, 2009 (U.S. District Court for the Central District of California Southern Division)