On the heels of an ABC News investigation, authorities have raided the offices of a suspect California loan modification company.
Nations Housing Modification Center (NHMC) was the focus of recent reports on Good Morning America and World News detailing concerns that the company was taking thousands of dollars upfront from desperate homeowners while providing little or no help with their lenders.
After the ABC News reports aired last Thursday, the San Diego District Attorney's Office served a search warrant late that night at the San Marcos, CA headquarters of NHMC and confiscated company records and equipment. The D.A.'s office refused to comment on the status of its investigation.
ABC News has learned that NHMC is also under investigation by the U.S. Postal Inspection Service and the Troubled Asset Relief Program's (TARP) Special Inspector General.
The raid has essentially shut down company operations, according to NHMC attorney Mitchell Dubick.
"How can they do business when the government has seized all of its computers, files and records," said Dubick. The company maintains that its staff of "attorneys, forensic accountants and lender specific negotiators" has successfully modified dozens of loans for consumers.
However, former employees describe NHMC as 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 says 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.
Homeowners Facing Foreclosure
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," said Jon Leibowitz, chairman of the Federal Trade Commission. "They promise them a lifeline, but they give them only an anchor instead."
The FTC says homeowners should avoid firms that demand an advance fee, guarantee to stop a foreclosure or modify a loan, or advise consumers to stop paying their loans. The FTC says homeowners looking to modify a loan should contact their lenders directly. If outside help is needed, the FTC recommends that consumers contact a non-profit, government-affiliated organization, such as the Hope Now Alliance.