Following an ABC News investigation that exposed a suspect California loan modification company taking thousands of dollars from desperate homeowners while providing little to no help with their lenders, civil charges have been filed against the Nations Housing Modification Center (NHMC), the Federal Trade Commission announced today.
At a news conference in Washington, FTC Chief Jon Liebowitz said that charges had been brought against the NHMC of San Diego, whose operations were essentially shut down after authorities raided the offices following reports on Good Morning America and World News.
"In our case against the so-called Nation's Housing Modification Center, the malefactors guaranteed to modify mortgages," Liebowitz said. "They required a minimum upfront fee of $2500 or 3000 or more but they failed to deliver on those promises. And they made the situation worse by actually telling the people who signed up for them not to make any more mortgage payments – that resulted in some consumers losing their homes."
"Just as disturbing," he continued, "this outfit bombarded homeowners with direct mail, making their companies look like the federal government's Making Home Affordable program. That program really does help distressed families in need and…they do it for free, not for a fee."
Liebowitz held up a company envelope with an address based in Washington and an official-looking seal. The envelope, he noted, even had a warning that tampering could be a crime, a statement usually found on government mail.
Former NHMC employees told ABC News the company was little more than a "boiler room" operation filled with telemarketers reading from a special script targeted at anxious homeowners facing foreclosure.
"They're convincing people to give money to them in advance, promising to do something that they're not doing, that they don't even have the resources, capabilities, knowledge or manpower to do," said former employee Tom Fatica.
Fatica said he was fired from NHMC after he questioned the absence of the attorneys and accountants who were supposed to help homeowners.
The ABC News investigation also revealed that three of the men operating Nations Housing Modification Center have past criminal records related to fraud. Company officials Bryan Rosenberg and Glenn Rosofsky were convicted in 2003 of participating in a mortgage fraud scheme in Baltimore, MD. Company president Michael Trap was convicted of felony charges in 2003 for lying to a federal grand jury in connection with a giant San Diego-area Ponzi scheme.
Trap refused to answer questions about his operation when confronted by ABC San Diego affiliate 10News.
As growing numbers of homeowners face imminent foreclosure, federal authorities say fraudulent loan modification companies have become a huge nationwide problem.
"There are just a lot of malefactors out there that are using this time of economic distress to go after consumers," Leibowitz has said. "They promise them a lifeline, but they give them only an anchor instead."
At today's announcement, Leibowitz thanked, among others, Treasury Secretary Tim Geithner, Special Inspector General for the Troubled Asset Relief Program Neil Barofsky, and Financial Crimes Enforcement Network director Jim Freis for their help in bringing these charges.