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Prosecutors crack down on mortgage scam artists

Posted: July 15, 2009 10:12 p.m.
Updated: July 16, 2009 4:55 a.m.
 

As state and federal prosecutors took aim Wednesday at sham mortgage brokers, one local real estate authority urged homeowners to be cautious.

Prosecutors nationwide filed 189 legal actions against loan modification consultants accused of bilking homeowners who are desperate to make their mortgage payments more affordable.

The lawsuits and cease-and-desist orders announced by Federal Trade Commission Chairman Jon Leibowitz and California Attorney General Edmund G. Brown were part of a nationwide sweep of alleged sham consultants by the federal agency and officials in 19 states.

“It was widespread,” said Fred Arnold of American Family Funding in Stevenson Ranch. “People were preying on those in their weakest moments.”

One defendant, Irvine-based U.S. Homeowners Assistance, is accused of collecting up to $3,500 each from dozens of borrowers in danger of losing their homes. Court documents allege one victim had her signature forged and financial information falsified on documents filed with her lender.

Also named in the lawsuits are Home Relief Services LLC, with offices in Irvine, Newport Beach and Anaheim; RMR Group Loss Mitigation, which has offices in Newport Beach, Orange, Huntington Beach, Corona and Fresno; Los Angeles-based United First Inc.; and U.S. Foreclosure Relief, which was also targeted by an FTC complaint.

The lawsuits seek millions of dollars in civil penalties, restitution for victims and a permanent injunction to keep the companies and the defendants from offering mortgage-relief services.

In the wake of the national mortgage crisis, Arnold said the surge of loan modifications represented relatively uncharted waters — fertile ground for shylocks.

As the 2008-09 president of the California Association of Mortgage Brokers, Arnold said he listened to myriad complaints from homeowners. A frequent refrain, he said, was that they had paid money only to see no follow-up from the brokers with whom they dealt.

In some cases, he said, homeowners explained how they were urged to stop making mortgage payments with the promise of loan modification — ultimately putting them at the risk of foreclosure.

The lawsuits filed by the FTC included allegations that Aliso Viejo-based Lucas Law Center persuaded distressed borrowers to stop paying their mortgages in order to pay the firm’s fees of up to $3,995.

Leibowitz said the FTC was working on rules that would prohibit a mortgage modification service from accepting up-front payments.
In the meantime, officials urged borrowers having trouble making mortgage payments to avoid foreclosure counselors that demand up-front fees.

Homeowners should never redirect mortgage payments to consultants who promise to pass the money on to lenders, the officials said.

When searching for a loan modification consultant, Arnold recommended several steps.

It’s advisable to get a referral from other people or businesses in the community, he said, and added homeowners should confirm the consultant has a state-approved advance fee agreement by checking the state Department of Real Estate Web site.

Additionally, Arnold advised asking a consultant how many modifications he or she has completed successfully, for referrals to other customers, what happens if the loan can not be modified, what kind of guarantees there are and whether the consultant is state-licensed.

Arnold was optimistic about the lawsuits filed Wednesday.

“It will bring awareness to the consumer that they need to proceed with caution,” he said. “It will hopefully shut down those businesses that are not compliant.”

The state Department of Real Estate’s Web site is dre.ca.gov.

 

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