A U.S. district court has banned a mortgage-relief business that operated a scheme causing consumer losses of nearly $19 million from doing further business.
U.S. Mortgage Funding Inc. allegedly charged thousands of consumers up to $2,600 each, based on bogus promises to provide loan modifications that would make mortgages much more affordable. According to the Federal Trade Commission, all but two of the defendants involved in the scheme have settled with the agency, while the two remaining corporate defendants received default judgments.
The FTC alleged that the defendants used direct mail, the Internet, and telemarketing to target homeowners – even those whose lenders had denied them modifications or who had been sent foreclosure notices. The defendants typically asked for half of the fee up-front, falsely claiming a success rate of up to 100%, according to the complaint.
The defendants claimed they could prevent foreclosure, that they were affiliated with or approved by consumers’ lenders and that they would refund consumers’ money if they failed to deliver promised services, according to the FTC. They told consumers not to contact their lenders and to stop making mortgage payments, claiming that falling behind on payments would demonstrate the consumers’ hardship to lenders, the FTC alleged.
The complaint charged U.S. Mortgage Funding Inc., Debt Remedy Partners Inc., Lower My Debts.com LLC, David Mahler, Jamen Lachs and John Incandela, Jr., also known as Jonathan Incandela, Jr., with violating the FTC Act and the FTC’s Telemarketing Sales Rule. An amended complaint added Louis Gendason as a defendant.
The court orders ban all the defendants from providing mortgage relief services, and Mahler and Debt Remedy Partners - who also provided debt relief services - are banned from continuing to do so.
The court orders for U.S. Mortgage Funding, Inc. and Lower My Debts.Com LLC ban them from engaging in any telemarketing. The remaining defendants are prohibited from violating the Telemarketing Sales Rule, and from misrepresenting any facts relevant to marketing or selling any product or service. Also under the settlements:
• A judgment for more than $17 million against Mahler and Debt Remedy Partners Inc. is suspended because of their inability to pay, except for $588,212. Mahler also is required to turn over a 1971 Hatteras yacht, a 2007 Cadillac DTC and a Rolex watch to the court-appointed receiver for liquidation.
• A judgment for $3.5 million against Lachs is suspended because of his inability to pay, except for $409,766.
• Judgments for more than $18 million against Incandela and Gendason and more than $19 million against U.S. Mortgage Funding and Lower My Debts.Com are not suspended, but the two have pled guilty to unrelated criminal charges, and both face prison terms.
The FTC’s Mortgage Assistance Relief Services Rule, known as the MARS Rule, bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. Because the defendants’ mortgage relief ads predated the MARS Rule, the FTC did not allege any violations of that rule in this case.
