Tammi Della got hit with a double economic whammy.
First, the housing market collapsed, leaving her family-owned construction business with little work. Della and her husband, who live in La Plata, Md., were forced to divert money from their household budget to help maintain the company's liability insurance, workers' compensation coverage and other necessities.
Then, a California firm that offered to help Della modify her mortgage and reduce her monthly payments took $1,000 as an upfront fee but did nothing to help her.
Della is one of hundreds of people around the country who sent as much as $3,900 each to National Home Loan Assistance Program, based in La Jolla, Calif. Despite its official-sounding name, the company has no connection to the Treasury Department's $75 billion program to aid struggling homeowners.
That widely publicized plan to help homeowners reduce their mortgage payments has given rise to a number of purported assistance companies that are preying on the desperate by promising aid they do not deliver.
The Federal Trade Commission said earlier this month that it had launched five enforcement actions against companies offering mortgage modification or foreclosure rescue services. The agency said it sent warning letters to 71 other firms, saying they might be engaged in deceptive marketing.
NHLAP was not among the companies hit with enforcement actions. But according to the accounts that its clients provided to BailoutSleuth, its program was particularly insidious. People who signed up were told to stop making payments on their homes, because lenders would be more willing to deal if they were more than 30 days behind. They also were told not to communicate with their mortgage companies, because NHLAP would be negotiating on their behalf.
By the time some homeowners figured out that NHLAP had taken their money and delivered no results, they were already in foreclosure.
Corey Schmitt, a building contractor in Manchester, Mich., told BailoutSleuth he paid $2,995 to NHLAP last October after a representative called him out of the blue with an offer of help. He didn't have the money, so he borrowed it from his parents
After he sent his application and his check, he tried repeatedly to contact NHLAP to find out about the status of his mortgage modification. No one returned his calls.
"I should have known better," Schmitt said. "But I needed to do something fast."
Schmitt is now in bankruptcy, trying to save his house through a court-supervised reorganization.
The San Diego County District Attorney's office is investigating NHLAP, after getting numerous complaints from its clients. The company's activities were first uncovered by a San Diego television station, XETV (To see reporter John Mattes' stories, click here).
BailoutSleuth discovered NHLAP because one of the people implicated in its activities, Ralph Spina, is now with another San Diego-area business that was the subject of two stories by our affiliate site, Sharesleuth.com (to see the stories, click here and here).
Spina is the NHLAP representative who cold called Tammi Della and persuaded her to pay $1,995 for modification help. He was fired from the company in December. According to his dismissal letter, NHLAP suspected him of misconduct, fraud and embezzlment.
Della says she paid a first installment of $1,000 on Nov. 28, four days after her first conversation with Spina. "He told me he was sure he could help me, but that it would take a little while,'' she said.
After hearing nothing from the company for two weeks, Della called Spina again. "He said it was still in the works, but was looking good,'' she recalled.
When that was followed by more silence, she made repeated calls to NHLAP, and eventually was told that Spina was gone. Della also called her mortgage company, Countrywide Financial, and learned that it had not heard from NHLAP until Dec. 9 - after Countrywide had sent her a modification packet on its own.
Della has been calling and faxing NHLAP ever since, trying to get refund. She complained to the California Attorney General's office, which told her to work with the Maryland Attorney General's office. Della and a representative from the Maryland office spoke jointly to an NHLAP employee in February who identified himself as Royal Forbes, and who agreed that she should get her money back.
But no refund came, and when the Maryland official followed up in March, he was told that Forbes no longer worked at NHLAP.
Although the Maryland attorney general's office continues to press NHLAP, Della isn't optimistic.
"I'm coming to the conclusion that I'll never see my $1,000,'' she said.
Della's only consolation was that she never sent the second installment of $995 that she owed NHLAP.
BailoutSleuth could not reach NHLAP by phone, so we sent an email asking for a response to the consumer complaints. The email went unanswered.
The FTC announced at a press conference on April 6 that it was cracking down on companies that use deceptive tactics to market mortgage modification and foreclosure relief services. It noted that some of the five companies targeted in the latest round of enforcement actions had given clients the false impression that they were affiliated with the federal government.
The five companies were:
n Federal Loan Modification Law Center, based in California. FedMod offers mortgage modification and foreclosure relief services to people in financial distress. It charges clients between $1,000 and $3,000, much of which must be paid up front. The FTC said that, in its radio advertisements, FedMod induces homeowners to call its toll-free number by misrepresenting that it was part of, or affiliated with, the federal government. The FTC said FedMod often fails to answer or return consumers' calls or provide updates about the status of their loan modifications, and assures consumers that negotiations with their lenders are proceeding when, in fact, little or no effort has been made to contact lenders.
n Bailout.hud.gov.us, also of California. The FTC said in its complaint that defendant Thomas Ryan used a foreign Internet registrar to falsely register two sites, bailout.hud-gov.us and bailout.dohgov.us. "Those sites were used to entice financially strapped consumers to seek mortgage loan modification services under the guise that the services were associated with, or were actually, the U.S. government, including HUD and the Treasury Department,'' the agency said. The FTC alleged that Ryan misled consumers across the country.
n Home Assure d/b/a Expert Foreclosure, based in Florida. The FTC says the company told consumers facing imminent home foreclosure that it had they could stop the process, regardless of the amount they owe their lenders. Home Assure charged upfront frees of $1,500 to $2,500. The FTC said the defendants falsely claim that they have special relationships with lenders, have helped thousands of consumers avoid foreclosure, and will provide a 100 percent satisfaction money-back guarantee.
n Hope Now Modifications LLC, of Georgia, and New Hope Property LLC, of New Jersey. The FTC alleged that the defendants misled consumers about their ability to provide mortgage modifications and foreclosure relief, and misrepresented that they were affiliated with or part of the HOPE NOW Alliance, the non-profit, government-endorsed organization created in response to the housing crisis.
According to the FTC, more than 20 state agencies also have taken actions against companies allegedly engaged in the deceptive marketing of mortgage modification and foreclosure relief services.
The Office of the Comptroller of the Currency issued a consumer advisory last month recommending that people who want to modify their home loans always start by approaching their lenders, and avoid any
counselors or consultants the require upfront fees.
Bob Hamlin, of Hobart, Ind., thought he took all the necessary precautions in dealing with NHLAP.
"I'm not a naive person,'' he said. "I'm a realist. I know that when something sounds to good to be true, it probably is.''
Hamlin told BailoutSleuth that when he got NHLAP's application materials in February, he sought advice from a mortgage specialist, who told him he probably didn't need NHLAP's services. But Hamlin wasn't making much progress with his own effort to modify his home loan, so he decided to see if outside help would speed the process.
Hamlin agreed to pay $1,495 to NHLAP, with $1,000 up front and the remainder upon completion of the loan modification. But he says his contact at the company quickly tried to change the terms.
"It probably wasn't three days after he got the retainer before he called wanting the rest,'' Hamlin said.
Hamlin refused, and his communication with the company deteriorated. He later learned that NHLAP had never negotiated with his bank, because the bank has a policy of not dealing with third parties.
Hamlin's story has a happer ending than that of other NHLAP clients. Four months after he started, he's in the final stages of completing his own mortgage modification deal with his bank.
2 Comments
It's a shame the government didn't step in soon to educate home owners of the available loan modification programs and that it shouldn't cost them any money.