Courtesy of Florence Klein

A United States district court stopped an operation that allegedly preyed on financially vulnerable homeowners at the request of the Federal Trade Commission. The scam may have convinced troubled homeowners to pay $1,995 or more for false services and bogus promises that could help them avoid foreclosure and renegotiate their mortgages.

The court order stops the allegedly illegal conduct, freezes the operation's assets, and appoints a receiver to run the business while the FTC moves forward with the investigation. The FTC complaint alleges the defendants website claimed,

“up to 95% of mortgages may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending.”

Forensic Mortgage Loan Audit Scams offer consumers a review of their mortgage loan documents to determine if 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 better terms on their mortgages. These fraud schemes violate the FTC Act and the Mortgage Assistance Relief Services Rule, known as the MARS Rule, by deceptively telling consumers they could renegotiate mortgages, making payments substantially more affordable. These scams offer “forensic audits” to negotiate with lenders purporting that if the lenders failed to do things right, they would provide a refund.

According to the FTC, California-based Consumer Advocates Group Experts, LLC, owner Ryan Zimmerman, and several other companies he controlled charged from $1,995 to $2,590 for their “forensic audits” and assured consumers in ads on their website that, “After our examinations, lenders suddenly get religion and become much more cooperative in renegotiating.” The site allegedly posted many consumer testimonials with claims such as,

“They did a wonderful job and saved my home. I received a 3.25% 30 yr 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!”

The complaint alleges that consumers often did not receive loan modifications or reduced payments. Consumers often found out from their lenders that the defendants never contacted them or did contact them but failed to follow up. The complaint 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 that their houses were being foreclosed upon.

The FTC complaint also names Paramount Asset Management Corporation and Advocates for Consumer Affairs Expert, LLC, as defendants in this case.

Fake foreclosure “rescue” professionals tell half-truths and outright lies to sell services promising relief to distressed homeowners. In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The fraudsters say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

According to the FTC and law enforcement officials:

There is no evidence that forensic loan audits help get loan modifications or any foreclosure relief, even if conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer. Some federal laws allow you to sue your lender based on errors in your loan documents. However, even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable. You can cancel your loan but will need to return the borrowed money but this could result in you losing your home.

If you or someone you know is faced with foreclosure, the FTC wants everyone to know how to recognize the telltale signs of fraud and report them. Here is how to spot a foreclosure scam:

• They guarantee to stop the foreclosure process no matter what your circumstances are.
• They instruct you to not contact your lender, lawyer or credit or housing counselor.
• They collect a fee before providing any service and accept payment only by cashier's check or wire transfer.
• They encourage you to lease your home so you can buy it back over time.
• They recommend you make your mortgage payments directly to them, rather than your lender.
• They urge you to transfer your property deed or title to them.
• They offer to buy your house for cash at a fixed price that is inappropriate for the housing market.
• They pressure you to sign papers you have not had a chance to read thoroughly or that you do not understand.

Stay safe,
Florence