The California attorney general closed two companies engaged in what the office called "fraudulent foreclosure-assistance" scams that gave consumers "false hope after paying up-front fees for nonexistent loan modification services."

In closing U.S. Foreclosure Relief Corp. and H.E. Servicing Inc. last weekend, Attorney General Edmund Brown secured $1 million in court-ordered restitution from the firms and their officers, George Escalante and Cesar Lopez.

The state had sued jointly with the Federal Trade Commission.

Brown's office said an investigation found that "the defendants used aggressive telemarketing tactics to convince distressed homeowners to pay $1,800 to $2,800 in up-front fees for loan modification services that included reductions in principal and lower interest rates."

The attorney general said that in sales calls H.E. Servicing claimed it had successfully negotiated 10,000 loan modifications. However, a full review of its internal records found the company opened only 2,960 loan modification files and completed 311.

The two executives could not be reached for comment at press time.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.