Fraud and Prevention

FTC Files Complaints Against Two New Mortgage Relief Services

By James Comtois
September 23, 2009

In its continuing crackdown on mortgage foreclosure rescue and loan modification scams, the Federal Trade Commission has filed legal complaints against two loan modification companies, bringing the total number of cases the FTC has filed since the housing crisis began to 22.

In the two new FTC actions, the defendants allegedly falsely claimed that they would obtain a mortgage modification in virtually all cases. According to the FTC's complaints, after charging homeowners large upfront fees, the defendants often did little or nothing to help them renegotiate their mortgages or stop foreclosure. The FTC seeks to stop the defendants' deceptive claims and make them forfeit their ill-gotten gains.

Nations Housing Modification Center and its principals allegedly violated the FTC Act and the FTC's Telemarketing Sales Rule by misrepresenting themselves as a federal government agency or affiliate and falsely claiming that, in return for a $3,000 fee they would obtain mortgage modifications that would make consumers' loan payments substantially more affordable in virtually every instance.

According to the FTC, the defendants also falsely claimed a 90% success rate, that only selected customers meeting certain qualifications were offered a loan, and 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 FTC filed the complaint against Nations Housing Modification Center and its principals, Michael A. Trap, Glenn S. Rosofsky and Bryan P. Rosenberg in the U.S. District Court for the District of Columbia.

In the other complaint, Infinity Group Services and its president are charged with violating the FTC Act by falsely representing that they would obtain a loan modification in all, or virtually all, instances; that they would give full refunds if they failed to do so; and that they would obtain loan refinancing for an upfront fee of $995.

According to the FTC's complaint, the defendants' radio ads and website urged consumers to call a toll-free number. Once consumers called, the defendants' sales personnel promised that, in return for the upfront fee, the company would help them modify their mortgage loans through HUD's Hope for Homeowners program. The defendants claimed a high success rate and offered a full refund if they failed.

The FTC alleges that the company often failed to obtain loan modifications and either failed to answer or return consumers' telephone calls or update them about their status. When consumers were able to contact the defendants, they were falsely told that negotiations were proceeding smoothly or that lenders had caused a delay. In many instances, consumers received refunds only after repeatedly complaining to the FTC, the California Attorney General's Office, or the Better Business Bureau.

The FTC's complaint further alleged that the defendants also offered mortgage loan refinancing for a "flat fee" of $995 but then sought additional fees ranging from $2,000 to $15,000. In other instances, consumers were led to believe that they had closed on their loans but were later told by the defendants that the loan would not be funded.

According to the complaint, the defendants' website stated that there were no hidden costs, but a fine-print footnote stated, "Rates, Fees and Terms are subject to change."

The defendants are Infinity Group Services and the company's president, Kahram Zamani. The FTC filed the complaint in the U.S. District Court for the Central District of California's Southern Division.

The defendants were unavailable for comment.