San Diego Man Gets Prison For Bilking Homeowners in Massive Mortgage Fraud

PHOTO: Michael Trap sentenced to 30 months in federal prison for mortgage loans modification scheme.
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A San Diego man featured in an ABC News investigation has been sentenced to 30 months in federal prison and ordered to pay $460,000 for defrauding desperate homeowners who were trying to modify their home mortgages.

Michael Trap, who ran a business called Nations Housing Modification Center, pled guilty to wire fraud and money laundering after duping homeowners who were falling behind on their mortgages into paying $2,500 to $3,000 for loan modification services. Trap's partner Glen Rosofsky, who was also featured in the ABC News investigation, has already been sentenced to more than five years in federal prison for his role in the scam, which prosecutors say earned the men nearly $1 million.

WATCH the ABC News Report

As detailed in earlier reports by ABC News, Nations Housing Modification Center boasted a prestigious Capitol Hill address in Washington, D.C., and sent letters marked with the seal of the U.S. Capitol to prospective customers. According to NHMC's mail solicitation, the company's staff of "attorneys, forensic accountants and lender specific negotiators" could help homeowners lower the principal on their loans and reduce their mortgage rates to "as low as 2 percent."

ABC News found that the firm's Washington address was really a mailbox at a UPS Store. The firm actually worked out of a nondescript office building in San Marcos, Calif., where, as part of a "boiler room" operation, telemarketers read from a script tailored for anxious homeowners, according to a former Nations employee-turned-whistleblower. The company had no accountants or lawyers on staff. In his guilty plea, Trap admitting making false statements to convince homeowners to win business. Prosecutors say more than 300 homeowners took the bait.

"They're convincing people to give them money 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," former NHMC employee Tom Fatica told ABC News. Fatica said he was fired after he began to question the absence of the lawyers and accountants who were supposedly hired to help the homeowners. "How can you modify 500 loans with two clerical people that probably never talked to the bank before?"

"I thought I was helping people save their houses and then it turned into a nightmare where I was helping those guys steal money from people that barely could afford to give it to them," said Fatica.

Trap, Rosofsky and a third man running NHMC were well known to law enforcement authorities for their previous activities. Rosofsky and Bryan Rosenberg were convicted by federal prosecutors in 2003 of charges connected to a mortgage fraud scheme in Baltimore. Both men received jail sentences for their role in the fraud.

"They pled guilty to a scheme that caused losses of between one-and-a-half and two-and-a-half million dollars at the time," said Dale Kelberman, a former Assistant U.S. Attorney who prosecuted the case. "They have demonstrated in the past that they are not reliable, that they have deceived others in the past, involving real estate transactions, and so I would not give them a lot of credibility," said Kelberman, now an attorney with the Baltimore firm Miles & Stockbridge.

Michael Trap also has a criminal past. In 2003, Trap pleaded guilty to lying to a federal grand jury in connection with the PinnFund scandal, the largest Ponzi scheme in San Diego history.

When confronted by San Diego ABC affiliate KGTV in 2009, Trapp refused to answer questions and ordered the cameras out of the building.

WATCH the KGTV report.

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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," said Jon Leibowitz, chairman of the Federal Trade Commission. "They promise them a lifeline, but they give them only an anchor instead."

The charges against Trap and Rosofsky were the result of an investigation by the IRS and the Special Inspector General of the Troubled Asset Relief Program.

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