Homeowners Beware: Loan Modification Schemes Out to Take Your Money

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Tens of thousands of American homeowners having trouble making their mortgage payments are being targeted by questionable "loan modification" companies, an ABC News investigation has found.

"This is a growing problem, and homeowners must be aware that the crooks are out there," Jon Leibowitz, chairman of the Federal Trade Commission (FTC), told ABC News.

According to the FTC, loan modification schemes collect thousands of dollars in advance from desperate homeowners while providing little or no help with their lenders.

Pennsylvania Ave. Maildrop

One loan modification firm that ABC News has learned is currently under federal investigation is Nations Housing Modification Center (NHMC), which boasts a prestigious Capitol Hill address, right on 611 Pennsylvania Avenue in Washington, D.C. 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 "as low as 2%."

VIDEO: Investigation uncovers businesses posing as something theyre not.
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However, ABC News found that the Pennsylvania Avenue address for the firm is really a mailbox at a UPS Store in D.C. NHMC is actually located in a nondescript office building in San Marcos, CA, 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.

"They're convincing people to give them 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 Tom Fatica, who says 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?"

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Fatica is now contacting his former customers at NHMC to warn them that they are being duped by the firm.

"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.

Unhappy Customers

Chad Nickless of Renton, WA, said he was convinced of NHMC's authenticity after he received its mailer with the Pennsylvania Avenue address. "With Obama being on the news about modifications, I thought 'ok,' maybe these guys have a better in with what's going on," Nickless told ABC News.

Nickless sent $1000 to NHMC after a company representative said its experts could help him avoid foreclosure. However, he quickly cut ties with the firm after he says he discovered that it took an additional $2000 from his banking account without his authorization and before it had done anything on his behalf.

"I don't think they are legitimate, I think they are taking advantage," said Nickless. "When you're afraid to lose your house and possibly company, you're gonna grasp at straws, and they seemed like somebody that could help."

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