Federal Trade Commission Sues to Stop Three Mortgage Scams

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Byline: Brian Browdie

The federal government is cracking down on three alleged mortgage relief scams that promise to help cash-strapped borrowers hold onto their homes while delivering little help and driving them deeper into debt.

Prime Legal Plans, American Mortgage Consulting Group, and Expense Management America have lured homeowners with promises ranging from representing them in court to negotiating with lenders on their behalf, according to the Federal Trade Commission in separate lawsuits filed recently in Florida, California and Ohio, the agency announced Tuesday.

"With many homeowners still struggling to hold onto their homes, the FTC takes a hard line against con artists who are seeking their next victim," FTC Chairman Jon Leibowitz said in a news release.

The cases represent an effort by the FTC, the Justice Department and the Department of Housing and Urban Development to halt schemes that target distressed homeowners, according to the agency.

The FTC alleges that since 2010, Prime Legal Plans and its affiliates have enrolled thousands of homeowners who pay as much as $750 a month for representation "from expert foreclosure defense attorneys who will fight their lenders to save their homes from foreclosure or make their mortgage payments more affordable," according to a complaint filed Sept. 24 in U.S. District Court in Miami. The FTC charges Prime Legal, which signs homeowners up for the service via telephone and online, with claiming falsely to be a private charity that works for homeowners who cannot afford legal representation.

Prime Legal did not respond immediately to a request for comment.

The FTC also charges that unsuspecting homeowners have paid American Mortgage Consulting Group and its affiliate, Home Guardian Management Solutions, fees ranging from $1,495 to $4,495 in exchange for a promise to reduce their mortgage payments substantially. "Rather than helping homeowners modify their mortgage loans or avoid foreclosure, defendants dupe distressed homeowners into paying thousands of dollars based on false promises and misrepresentations," the agency alleged in a complaint filed Sept. 18 in U.S. District Court in Santa Ana, Calif. "Indeed, defendants provide little, if any, meaningful assistance to modify homeowners' mortgage loans or prevent foreclosure."

According to the FTC, American Mortgage and Home Guardian signed up thousands of consumers nationwide via telephone calls in which operators told borrowers the federal government paid American Mortgage Consulting to help homeowners.

"My client has made every effort to work with the FTC, cooperating and disclosing all information that they requested, and opening his entire business to the government because he has nothing to hide," Marc Lazo, an attorney for Mark Nagy Atalla, a principal at American Mortgage and Home Guardian, told American Banker. …