California Attorney General Edmund G. Brown Jr. forced two foreclosure rescue firms to close their doors this week and secured a court judgment that prohibits the three principal individuals involved from ever again workingin the real estate industry. Brown also recovered more than $1 million in restitution for victims he says were left with “false hope” after paying upfront fees for loan modification services that were never delivered.
Back in July of last year, Brown filed suit against two affiliated companies based in Orange County – U.S. Foreclosure Relief Corp. and H.E. Servicing, Inc. – as well as their executives, George Escalante and Cesar Lopez, and legal representative Adrian Pomery. The suit was filed jointly with the Federal Trade Commission (FTC) and the State of Missouri as part of “Operation Loan Lies,” a massive federal-state crackdown on loan mod fraud.
The joint investigation, initiated in March 2009, found that the defendants used aggressive telemarketing tactics to convince distressed homeowners to pay $1,800 to $2,800 in upfront fees for loan modification services that included reductions in principal and lower interest rates.
According to the attorney general’s office, H.E. Servicing, for example, claimed it had successfully negotiated 10,000 loan modifications. However, a full review of internal records found the company opened only 2,960 loan modification files and completed only 311. It is estimated that California homeowners accounted for 15 to 20 percent of the company’s opened loan modification files.
Brown’s judgment permanently shuts down U.S. Foreclosure Relief and H.E. Servicing and prohibits the defendants from ever working in the real estate and loan modification industries again. Additionally, the judgment will provide more than $1 million in relief to victims paid through frozen company funds and the sale of the principals’ possessions.
While in operation, Brown says H.E. Servicing spent $70,000 a week on radio and television advertising in 100 media markets nationwide and had plans to spend an additional $10,000 to $30,000 a week with the goal of bringing in an estimated $270,000 a week in new business. A report prepared by an outside accountant found that in the first six months of 2009 alone, the company made $4.5 million in net income.
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