Seven companies and three individual defendants are facing a restraining order after the Federal Trade Commission filed suit, alleging they “preyed” on distressed homeowners by peddling a deceptive mortgage relief scheme.
Using an “official looking mailer,” television and radio ads, and telemarketing calls, the defendants told homeowners over the last three years that for $2,000 to $4,000 they could help them avoid foreclosure with lower monthly payments and interest rates or conversion from an adjustable-rate to a fixed-rate mortgage. But according to the agency’s complaint, the defendants took the up-front fees and then delivered “little or no help.” As a result, victims were driven even deeper into debt.
In addition to mortgage adjustments, the Web sites offered bankruptcy advice, credit counseling, and “forensic mortgage audits” that could be used “to gain leverage in a successful loan modification.” They promised results within 60 to 90 days and claimed that the mortgage payments of “thousands of homeowners” have been reduced by 30-60 percent. Their mailer warned that “YOU MAY FORFEIT LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT ACTION” and “WE CAN HELP SAVE YOUR HOME.”
The agency alleged that the defendants – Apex Solutions, Inc., William D. Goodrich, Attorney, Inc., A to Z Marketing, Inc., Apex Members, LLC, Backend Inc., Expert Processing Center, Inc., and Smart Funding Corp., as well as individuals Ratan Baid, Madhulika Baid, and William D. Goodrich – violated Section 5 of the FTC Act and ran afoul of the Mortgage Assistance Relief Services Rule, which prohibits up-front fees until homeowners have in hand a written offer from a lender or mortgage servicer.
A federal court judge in California found good cause to believe “immediate and irreparable harm will result from defendants’ continuing violations.” He halted defendants’ operations and froze their assets pending trial.
To read the complaint in FTC v. A to Z Marketing, click here.
To read the temporary restraining order, click here.
Why it matters: The agency has been aggressive in using its new powers under the Mortgage Assistance Relief Services Rule to prosecute alleged scams targeting distressed homeowners. Last year, the FTC announced a partnership with the Consumer Financial Protection Bureau to fight deceptive and misleading mortgage advertisements and sent more than 30 warning letters. And just last month, the agency announced a $7.5 million fine, the largest civil fine ever collected by the agency for alleged violations of the Telemarketing Sales Rule, in a suit where the FTC said the defendant scammed service members with misleading mortgage claims.