- The Washington Times - Tuesday, April 7, 2009

The Federal Loan Modification Law Center sounds like it could be a government program, and its official-sounding advertisements promise to help people who are facing foreclosure save their homes.

But authorities say it's a scam, one of a series of schemes that have emerged in recent months, particularly since President Obama announced in February plans to help 7 million to 9 million homeowners refinance or restructure their mortgages.

“The unscrupulous actions of individuals and companies who exploit the misfortune of others is despicable, it's immoral, and it's also illegal,” said Attorney General Eric H. Holder Jr. during a news conference Monday morning announcing a multi-agency crackdown on mortgage-recovery fraud. The news conference also was attended by Treasury Secretary Timothy F. Geithner, Department of Housing and Urban Development Secretary Shaun Donovan, Federal Trade Commission Chairman Jon Leibowitz and Illinois Attorney General Lisa Madigan.

It is unclear exactly how many people have fallen victim to such scams, but the FTC said it recently found 71 companies running suspicious advertisements either in print or online and recently has filed lawsuits against five of those companies, including the Federal Loan Modification Law Center.

Authorities say states have taken more than 150 enforcement actions against mortgage-rescue companies, and the Justice Department recently won convictions in two separate cases against scam artists.

“Now these companies are on notice,” Mr. Leibowitz said. “If you don't clean up your act, you are next.”

Jim Harper, director of information policy studies at the libertarian Cato Institute, said it will be difficult, if not impossible, in many cases for authorities to keep up with the scammers.

“The online environment is very fluid, so anyone with any skill is not going to be detectable when the government comes looking for them,” he said. “The No. 1 line of defense is the American consumer has to be smart about this.”

Mr. Harper noted that many of these scams have become quite sophisticated and frequently use realistic scenarios and events in the news, such as Mr. Obama's mortgage-recovery program, to lure victims. They are also quite adept at using technology: The FTC said the scheme of one defendant it filed suit against had a Web site with an address nearly identical to HUD.

According to a lawsuit the FTC filed Monday, the Federal Loan Modification Law Center engaged in an extensive national advertising campaign on the Internet and on radio and television geared toward people struggling to pay their mortgages.

In the radio advertisements, a disclaimer was played noting the company was not affiliated with the federal government, but the disclaimer was played at a speed several times faster and at a lower volume than the actual advertisement, according to court documents.

One radio advertisement said: “Please stay tuned for this important public announcement for those in danger of losing their home. Federal Loan Modification has a program for those that have fallen behind on their mortgage and are facing foreclosure.”

Authorities say that “program” included paying the Federal Loan Modification Law Center between $1,500 and $3,000 up front. After that, according to court records, victims often couldn't get in touch with the Federal Loan Modification Center, or victims were simply told lies, including that everything was going smoothly or that lenders' delays had held up the process of getting their mortgage-recovery money.

Representatives of the Federal Loan Modification Law Center couldn't be reached for comment Monday.

No one answered calls made to two California phone numbers associated with the Federal Loan Modification Center. Neither number had a voice-mailbox, though one had a recorded message instructing callers to call back later.


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