FTC, 23 states act to stop sham loan consultants

LOS ANGELES -- Prosecutors nationwide filed 189 legal actions Wednesday against loan modification consultants accused of bilking homeowners who are desperate to make their mortgage payments more affordable.

The lawsuits and cease-and-desist orders announced by Federal Trade Commission Chairman Jon Leibowitz and California Attorney General Edmund Brown were part of a nationwide sweep of alleged sham consultants conducted by the federal agency and 23 states.

Brown said the lawsuits the attorney general's office filed in Orange and Los Angeles counties include allegations against five companies and their subsidiaries and staff members. In all, 21 individuals and 14 companies were named.

Authorities said they also arrested a Newport Beach man Tuesday who was accused of using the names of the Department of Housing and Urban Development Department and other government agencies as part of his business.

The lawsuits seek millions of dollars in civil penalties, restitution for victims and a permanent injunction to keep the companies and the defendants from offering mortgage-relief services, Brown said.

"The loan modification industry is teeming with confident men and charlatans who rip off desperate homeowners facing foreclosure," he said. "Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn't provide an ounce of relief."

One defendant, Irvine-based U.S. Homeowners Assistance, is accused of collecting up to $3,500 each from dozens of borrowers in danger of losing their homes.

The suit says one victim had her signature forged and financial information falsified on documents filed with her lender.

Another company, Orange-based U.S. Foreclosure Relief, collected more than $4.4 million from borrowers during a nine-month period, but failed in most instances to provide any services and avoided responding to consumers' inquiries, the officials said.

"These con artists see the high foreclosure rates as an opportunity to prey on people in distress," Leibowitz said. "They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline."