Court Halts Mortgage Relief Scheme that Targeted Homeowners Facing Foreclosure
By request of the Federal Trade Commission (FTC), a federal court halted a sham operation that allegedly told financially distressed homeowners that it would help get their mortgages modified, but instead effectively stole their mortgage payments, leading some to foreclosure and bankruptcy.
The FTC seeks to permanently stop the scheme and its participants' illegal practices. It also filed a contempt action against one of the scheme's principals, Brian Pacios, who is under a previous court order that prohibited him from mortgage relief activities.
"These defendants stole mortgage payments from struggling homeowners, and they pretended to be a nonprofit working with the government," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "We'll continue to shut down shameful mortgage frauds like this one."
According to the FTC's complaint, the defendants, sometimes doing business as HOPE Services, and more recently as HAMP Services, targeted consumers facing foreclosure, and especially those who had failed to get any relief from their mortgage lenders. Pretending to be "nonprofit" organization with government ties, they sent mail bearing what looked like an official government seal, and indicated that the recipients might be eligible for a "New 2014 Home Affordable Modification Program."
The defendants called the program "an aggressive update to Obama's original modification program,"and stated that "[y]our bank is now incentivized by the government to lower your interest rate . . ."
The FTC alleges that the defendants falsely claimed they had a high success rate, special contacts who would help get loan terms modified, and an ability to succeed even when consumers had failed. After obtaining consumers' financial information, they told them they were "preliminarily approved" and falsely claimed they would submit consumers' loan modification applications to the U.S. Department of Housing and Urban Development, the Neighborhood Assistance Corporation of America, and the "Making Home Affordable"(MHA) program. The MHA application form they sent consumers excluded the page that warns, "BEWARE OF FORECLOSURE RESCUE SCAMS,"and "never make your mortgage payments to anyone other than your mortgage company without their approval."
The FTC's complaint states that the defendants later falsely told consumers they were approved for a low interest rate and monthly payments significantly lower than their current payment, and that after making three monthly trial payments, and often a fee to reinstate a defaulted loan, they would get a loan modification and be safe from foreclosure. They also told consumers not to speak with their lender or an attorney.
In reality, the FTC says that homeowners who made the payments did not have their mortgages modified, and their lenders never received their trial payments. Instead, they were contacted by an "Advocacy Department" run by one of the defendants, Denny Lake, and told that the department would get them an even better loan modification than the one purportedly obtained through MHA.
But, according to the FTC, the "Advocacy Department" was just another trick designed to make sure consumers continued to make all the monthly trial payments. When consumers raised concerns about continuing foreclosure warnings, sale date notices, and even court dates, they were told their loan modification was being processed or nearly completed.
By keeping consumers on the hook for months, the defendants doubled, tripled, or quadrupled consumers' trial payments. They told consumers they would put these payments in escrow accounts and eventually pay off consumers' lenders. In fact, the defendants simply took the money for themselves. As a result, some consumers lost their homes, and most consumers incurred additional penalties and interest as they fell further behind on their mortgages, the FTC's complaint alleges.
The defendants include Chad Caldaronello, also known as Chad Carlson and Chad Johnson; C.C. Enterprises Inc., doing business as HOPE Services, Retention Divisions, and Trust Payment Center; Justin Moreira, a/k/a Justin Mason, Justin King and Justin Smith; Derek Nelson, a/k/a Dereck Wilson; D.N. Marketing Inc., d/b/a HAMP Services and Trial Payment Processing; and Brian Pacios, a/k/a Brian Berry and Brian Kelly. They are charged with violating the FTC Act, the FTC's Mortgage Assistance Relief Services Rule (MARS), and its Telemarketing Sales Rule (TSR).
Denny Lake, d/b/a JD United, Advocacy Department, Advocacy Division, and Advocacy Agency, is charged with knowing or consciously avoiding knowing the other defendants were violating the MARS and the TSR. A relief defendant, Cortney Gonsalves, is charged with holding money and assets she received from the scam.