A mortgage modification scam that took advantage of distressed consumers facing possible foreclosure has reached a $3.6 million settlement with the Federal Trade Commission.
This settlement represents the FTC’s largest judgment to date against a purported mortgage assistance relief provider.
As part of the settlement, the South Florida-based defendants will surrender their assets and be banned permanently from offering mortgage relief and debt aid services to consumers.
In 2012, as part of the Distressed Homeowner Initiative, the FTC charged 11 companies and five individuals with running an illegal mortgage modification scheme that asked for upfront fees from consumers in order to purportedly save their home from foreclosure. The scam went by a variety of names, including Prime Legal Plans, Consumer Legal Plans, Frontier Legal Plans, 123 Save A Home, American Hardship, Back Office Support Systems, Consumer Acquisition Network, and Legal Servicing and Billing Partners.
The defendants—Lazaro Dinh, Kim Landolfi, Derek Radzikowski, Andrew Primavera, Christopher Edwards and Jason Desmond—told consumers they could prevent foreclosure or significantly lower their mortgage payments by conducting audits of their loans and providing the homeowners with access to full-service, expert legal representation to fight their lenders, the FTC complaint says.
The scam started in mid-2010 and was marketed nationally in English and Spanish under the names “Reaching U Network” and “American Legal Plans.” The defendants advertised that “80% of mortgages contain some fraud” and, in some cases, even a small error in a borrower’s loan document could nullify the mortgage.
Meanwhile, the marketing campaign stated to prospective clients that its “network attorneys have helped hundreds of Americans stay in their homes,” the complaint says.
Instead of helping consumers, the defendants charged them illegal advance fees ranging from $595 to $750 per month. This was all done while delivering little or no help in getting a mortgage modification, therefore pushing the borrower deeper into debt.
Overall, $25 million of fees was accumulated via this scheme.
“Rather than make good on their promise to offer people relief from mortgage trouble, these schemers put their targets even further behind financially,” says Jessica Rich, director of the Federal Trade Commission’s bureau of consumer protection. “They broke the law by taking money upfront and making false promises.”
Under federal law, foreclosure rescue and loan modification service providers are banned from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.
In addition, the charges said the scheme violated the Telemarketing Sales Rule, the FTC Act, and the Mortgage Assistance Relief Services Rule’s ban on collecting advance fees for mortgage relief. The FTC asserts that the defendants conducted numerous calls to numbers listed on the national Do Not Call Registry, as well as not paying the required annual fee to access the registry.