The housing crisis has not eased for millions of homeowners, and one of the telltale signs is the amount of money desperate homeowners are willing to spend seeking so-called “solutions.” Just this week, a U.S. district court put a halt to a mortgage relief firm that had collected up to $2,600 each from thousands of consumers to help them avoid foreclosure. The court acted upon the request of the Federal Trade Commission (FTC). The FTC’s press release says the victims paid for help “based on bogus promises to provide loan modifications that would make mortgages much more affordable.”
One of the defendants has been ordered to turn over a 1971 Hatteras yacht, a 2007 Cadillac DTS, and a Rolex watch to the court-appointed receiver for liquidation.
The FTC has engaged in a number of efforts to prevent abuses in the “mortgage assistance industry.” This latest case against U.S. Mortgage Funding, Inc. cost consumers nearly $19 million, according to the FTC’s complaint. The complaint also says that as part of the pitch—delivered to homeowners by direct mail, the Internet, and telemarketing—the company “falsely claim(ed) a success rate of up to 100 percent.” Another reason homeowners may have been willing to fork over fees? The defendants allegedly also promised refunds if they were unsuccessful in preventing these foreclosures.
Upfront Fees for Mortgage Assistance Are A No-No
In November, 2010, the FTC issued the Mortgage Assistance Relief Services (MARS) Rule that, among other things, prohibit mortgage relief firms from charging fees until homeowners have been presented with a written offer from their lender or servicer that they decide is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. There is an exemption for attorneys who fulfill certain requirements.
Yesterday’s complaint by the FTC charged U.S. Mortgage Funding, Inc., Debt Remedy Partners Inc., Lower My Debts.com LLC, David Mahler, Jamen Lachs, and John Incandela, Jr., also known as Jonathan Incandela, Jr., with violating the FTC Act and the FTC’s Telemarketing Sales Rule. An amended complaint added Louis Gendason as a defendant.
The court orders ban all the defendants from providing mortgage relief services, and Mahler and Debt Remedy Partners, who also provided debt relief services, are banned from continuing to do so. The court orders for U.S. Mortgage Funding, Inc. and Lower My Debts.Com LLC ban them from engaging in any telemarketing. The remaining defendants are prohibited from violating the Telemarketing Sales Rule, and from misrepresenting any facts relevant to marketing or selling any product or service.
Note: According to the FTC, these consent decrees are for settlement purposes only and do not constitute an admission by the defendants that the law has been violated. Consent decrees have the force of law when approved and signed by the District Court judge.
Image: Jun Acullador, via Flickr.com