FTC, 19 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 G. Brown were part of a nationwide sweep of alleged sham consultants by the federal agency and officials in 19 states.

Leibowitz used the announcement to put scam artists on notice and urged homeowners to protect themselves from being exploited.

He said fraudulent loan modification consultants are "full of hollow promises designed to fatten the pockets of criminals and con men."

The lawsuits filed by the FTC included allegations that Aliso Viejo-based Lucas Law Center persuaded distressed borrowers to stop paying their mortgages in order to pay the firm's fees of up to $3,995.

The agency also filed suits against Orange-based U.S. Foreclosure Relief Corp., Santa Ana-based Loss Mitigation Services, and Apply2Save, of Coeur d'Alene, Idaho.

The lawsuits Brown's office filed in Orange and Los Angeles counties include allegations against five companies and their subsidiaries and staff members.

"We are going to do everything we can to stop it, realizing that there are more rats to come out of their holes than we can stomp on," Brown said. "But we will keep doing the best we can because it is horrible to take advantage of somebody who is vulnerable with their family exposed to foreclosure."

Dean Schafer, CEO of Loss Mitigation Services, said he sympathized with the FTC's goal of weeding out bad players in his industry and was surprised his company had been singled out. He said he was still reviewing the lawsuit and had no comment on its specific allegations.

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.