A U.S. district court has halted an operation that allegedly preyed on financially vulnerable homeowners, convincing them to pay $1,995 or more by holding out false promises that they could help them avoid foreclosure and renegotiate their mortgages.
The court's order stops the allegedly illegal conduct, freezes the operation's assets and appoints a receiver to run the business while the Federal Trade Commission moves ahead with the case.
According to the FTC, Los Angeles-based Consumer Advocates Group Experts LLC, company owner Ryan Zimmerman and several other companies he controlled charged between $1,995 to $2,590 for "forensic audits," assuring consumers in ads on their Web site, www.consumer-advocates-group.com, that, “After our examinations, lenders suddenly get religion and become much more cooperative in renegotiating.”
The defendants behind the operation, according to the FTC, claimed on their site that “up to 95% of mortgages may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending." Using this claim, several defendants, including Consumer Advocates Group Experts LLC, virtually guaranteed that they could obtain mortgage modifications with reduced interest rates and lower monthly mortgage payments for consumers.
The defendants offered to review consumers’ mortgage loan documents to determine whether their lenders complied with state and federal mortgage lending laws, and made allegedly false claims that the consumers could use the resulting forensic audits to avoid foreclosure and negotiate more favorable terms on their mortgages.
The complaint charges the defendants with violating the FTC Act and the Mortgage Assistance Relief Services Rule, known as the MARS Rule, by deceptively telling consumers that they could renegotiate mortgages, making payments substantially more affordable; that they could use the forensic audits to negotiate with lenders; and that if they failed to do these things, they would provide a refund.
The complaint also charges the defendants with other MARS Rule violations, including collecting fees for mortgage foreclosure rescue and loan modification services before homeowners accept a written offer from their lender or servicer, and failing to make required disclosures.
One of many supposed consumer testimonials on the site proclaimed: "They did a wonderful job and saved my home. I received a 3.25% 30-year fixed ... Wells Fargo kept telling me that my loan mod was denied. CAG put together my package in 30 days and got me APPROVED in under 90 days!"
Consumers who wanted to learn more about the defendants’ services were invited to call the toll-free number listed on the defendants’ Web site, or provide contact information through the site and receive a sales call. According to the complaint, those who followed up were often told:
• to stop contacting the lender because it would hinder the negotiation process and, sometimes, to stop making monthly payments;
• that there was a 100% chance that the defendants’ forensic audits would uncover violations of federal and state mortgage and credit laws, and that consumers would receive either a loan modification from their lenders or a refund from the defendants; and
• that the defendants’ negotiations with the consumers’ lenders could lower their mortgage payments by 50%.
The complaint alleges that consumers often did not receive loan modifications or reduced payments and often found out from their lenders that the defendants either never contacted them, or did contact them but failed to follow up.
The complaint also alleges that the defendants routinely failed to answer or return consumers’ telephone calls and emails seeking updates on their mortgage modifications, failed to provide refunds to consumers who requested them, and put consumers at risk of losing their homes and damaging their credit ratings. Consumers often learned too late that their houses were being foreclosed upon, according to the complaint.
In addition to Consumer Advocates Group Experts LLC and Zimmerman, the complaint names Paramount Asset Management Corporation and Advocates for Consumer Affairs Expert LLC, as defendants in this case.