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Federal Trade Commission Chairman Jon Leibowitz, joined by U.S. Senator Harry Reid, Nevada Attorney General Catherine Cortez Masto, and Assistant Attorney General Tony West of the Civil Division of the U.S. Department of Justice, today announced Operation Stolen Hope as part of a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involves 118 actions by 26 federal and state agencies. The FTC actions were announced in Nevada, where one in every 23 homes is facing foreclosure.

“These operators targeted consumers who were on the brink of financial disaster, and instead of holding them back, they pushed them over,” FTC Chairman Jon Leibowitz said. “If you’re worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they’ll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

The FTC announced six lawsuits, bringing to 28 the number of mortgage relief cases the Commission has brought since the housing crisis began. Twenty-five state attorneys general and other state and local agencies announced 112 similar actions.

In today’s announced FTC actions, the defendants falsely claimed that they would obtain mortgage modifications that would make consumers’ monthly mortgage payments substantially more affordable. After charging large up-front fees, they often did little or nothing to help homeowners renegotiate their mortgages. According to the FTC’s complaints, some of the defendants falsely claimed a high success rate and promised to give consumers refunds if they failed to modify their mortgages, and others misrepresented that they were affiliated with the federal government or consumers’ mortgage lenders or servicers. Each of the cases allege violations of the FTC Act. In addition, several cases allege violations of the Telemarketing Sales Rule (TSR) or the Credit Repair Organizations Act (CROA). In each case, the FTC is asking the court to stop the defendants’ deceptive claims and make them forfeit their ill-gotten gains. In five of the cases, the court already issued a temporary restraining order and froze the defendants’ assets.

Crossland Credit Consulting Corp. and its co-defendants allegedly operated deceptive mortgage refinancing, credit repair, and loan modification schemes. According to the FTC complaint, they falsely promised to use proceeds from mortgage refinances to promptly pay off consumers’ original loans, but often pocketed the money instead. They misrepresented that they would repair consumers’ credit records by removing truthful negative items from their credit reports so they could obtain mortgage loans, and charged advance fees for those services in violation of both the CROA and the TSR. They also falsely claimed that they would modify consumers’ mortgages to obtain substantially lower interest rates and monthly payments. The court immediately barred the practices and froze the defendants’ assets pending a hearing.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida. At the FTC’s request, the court ordered a halt to the unlawful operations, pending resolution of the case.

Crowder Law Group and its co-defendants allegedly misrepresented themselves as a federal government agency or affiliate. Their personalized postcards to consumers stated, “You may qualify under the new government bailout to refinance your current mortgage . . . ” Some postcards described the defendants’ programs as federal programs and were signed by an attorney in the consumer’s state. The defendants charged a $2,000 fee. The court immediately barred the practices and froze the defendants’ assets pending a hearing. Some of the defendants have stipulated to a preliminary injunction with an asset freeze.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Middle District of Florida.

The Debt Advocacy Center charged consumers $1,500 in advance and promised a refund of $1,500 or more if they failed to successfully obtain a loan modification, according to the FTC complaint. The Commission alleged that when consumers did not get a loan modification, The Debt Advocacy Center told them that the $1,500 was only for advice and educational materials and refused to return payments from consumers. The Debt Advocacy Center also claimed a 90 percent success rate and allegedly debited consumers’ bank accounts and charged their credit cards without authorization. In April 2009, The Debt Advocacy Center received a letter from the FTC warning that its ads may violate federal law, but it did little to change its practices. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of Ohio, Eastern Division.

On its Web site and in unsolicited telephone calls to distressed homeowners, First Universal Lending and its principals allegedly said they would negotiate mortgage modifications that would reduce homeowners’ monthly mortgage payments. The FTC complaint alleged that they charged consumers huge up-front fees, sometimes as much as $7,000, and told them if they stopped paying their mortgages it would help them in negotiations with lenders. In many cases, they failed to obtain loan modifications for consumers. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Florida, West Palm Beach Division.

Kirkland Young and its manager allegedly misrepresented themselves as consumers’ mortgage lenders or servicers or their affiliate. The company left telephone messages for consumers stating that they wanted to approve the consumers for a loan modification. By telephone, they discussed specific interest rates and monthly payments and promised that they would stop foreclosure. The complaint alleges that they failed to keep their promises to obtain loan modifications to make payments more affordable. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

Truman Foreclosure Assistance and its co-defendants charged fees ranging from $1,500 to $3,000, a substantial portion of which was due up-front. According to the FTC complaint, they falsely claimed a 99 percent success rate and stated that hiring them entailed little risk because their services were backed with a “100% Money Back Guarantee,” which they allegedly refused to honor in several instances.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

The FTC also announced an amended complaint charging additional defendants in a previously filed mortgage relief services case:

The FTC filed a proposed amended complaint in its action pending against Dinamica Financiera, LLC, adding as defendants Oficinas Legales de Eric-Douglas Johnson, Inc. and former attorney Eric Douglas Johnson, which continued the defendants’ operations after the court entered a preliminary injunction on June 3, 2009. At the time defendant Eric Douglas Johnson joined the operation, California law permitted attorneys to accept up-front fees for mortgage modification services. The original complaint, filed in May 2009, alleged that the defendants falsely promised Spanish-speaking consumers who were behind in their mortgage payments that they would stop foreclosure. (See May 27, 2009 press release http://www.ftc.gov/opa/2009/05/mortgagerescue.shtm).

The Commission vote authorizing the staff to file the proposed amended complaint was 4-0. The complaint and proposed amended complaint were filed in the U.S. District Court for the Central District of California.

In addition to these cases, the FTC has reached settlements in three previously-filed cases against mortgage relief scams and a partial settlement in another case.

First, the Commission has obtained an agreed upon federal court order barring deceptive practices by Peter J. Porcelli, Safe Harbour Foundation of Florida, Inc., Silverstone Lending, LLC, and Silverstone Financial, LLC, who allegedly lured homeowners into high-cost, short-term loans secured by an additional mortgage on their homes, in violation of federal law and a previous court order against them. (see February 28, 2008 press release http://www.ftc.gov/opa/2008/02/rescue.shtm). The settlement also resolves a contempt action against those defendants.

The settlement order bars the settling defendants from engaging in specific lending practices in violation of the Home Ownership and Equity Protection Act (HOEPA), including making a HOEPA loan without regard to a consumer’s repayment ability. In addition, they are barred from lending practices in violation of HOEPA and Regulation Z’s disclosure and misrepresentation provisions. The order imposes a $2.79 million judgment that will be suspended based on the defendants’ inability to pay. The full judgments against them will become due immediately if they are found to have misrepresented their financial condition. A separate settlement order against co-defendant Southeast Advertising, Inc. applies the same prohibitions and bars the company from accepting the assignment of a loan with any of the characteristics described in the orders. The Commission vote to authorize staff to file each of the stipulated final orders was 4-0. The orders were filed in the U.S. District Court for the Northern District of Illinois, Eastern Division.

Second, the FTC has obtained a stipulated order that bans Thomas Ryan from offering mortgage relief services. The FTC alleged that his Web sites – bailout.hud-gov.us and bailout.dohgov.us, which featured an official looking seal and the names of federal homeowner relief plans – misled homeowners that he was the U.S. government. (See April 6, 2009 press release http://www.ftc.gov/opa/2009/04/hud.shtm). The settlement order also bars Ryan from making misrepresentations about financial related or any other goods and services. The Commission vote to authorize staff to file the stipulated final order was 4-0. The order was entered in the U.S. District Court for the District of Columbia.

Third, the Commission has agreed to settlements in its case against Freedom Foreclosure Prevention Services, LLC that, pending court approval, would ban Jeffrey Segal and Michael Workman from working in the loan modification industry and bar them from misrepresenting material facts in selling any goods or services. The settlements also would impose suspended judgments of $5,462,432, based on the defendants’ inability to pay. Segal and Workman allegedly ran a bogus mortgage foreclosure relief operation that misrepresented both the “loss mitigation” services it offered and the earnings potential of the business opportunity it sold. (See June 22, 2009 press release http://www.ftc.gov/opa/2009/06/freedom.shtm). The Commission vote to authorize staff to file each of the stipulated final orders was 4-0, with Commissioner J. Thomas Rosch concurring in part and dissenting in part. A copy of his statement is available at [http://www.ftc.gov/os/2009/11/091124roschstmt.pdf]. The orders were filed in the U.S. District Court for the District of Arizona.

Fourth, the FTC has obtained a partial settlement that, pending court approval, will prohibit the allegedly deceptive practices of Brian Blanchard, sole owner of B Home Associates, LLC d/b/a Expert Foreclosure, and Michael Grieco, both of whom are part owners of Home Assure, LLC. The settlement orders prohibit Blanchard and Grieco from misrepresenting material facts about any goods or services and selling or otherwise disclosing personal information about anyone who paid them. The orders impose suspended judgments of $3,849,919.84 and $3,721,807.84 on Blanchard and Grieco. They falsely promised consumers that they could stop foreclosures, regardless of how much money consumers owed, charged up to $2,500 in advance, and promised a full refund if they failed. The action continues against other defendants who have not settled. (See April 6, 2009 press release http://www.ftc.gov/opa/2009/04/hud.shtm). The Commission vote to authorize staff to file each of the stipulated final orders was 4-0. The orders were filed in the U.S. District Court for the Middle District of Florida.

The FTC asks people to report foreclosure rescue and mortgage modification scams to FTC.gov or by calling 1-877-FTC-HELP. The FTC makes those complaints available to federal, state, and local law enforcement through the Consumer Sentinel Network.

NOTE: The Commission files a complaint 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. A complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

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 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 1,700 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.

(Project Stolen Hope)
(FTC File Nos. 0923169, 0923192, 0923130, 0923143, 0923173, 0923162, X090050, X080022, X020103, X090030, X090055, X090036, X090026)