WASHINGTON - - How's this for a business plan? A company buys or rents lists of recent default filings from across the country - thousands of people who have been notified by lenders that if they don't get their mortgage payments back on track, the next step will be foreclosure.
Then it sends each homeowner on the list a letter with an urgent message: "We know you're having a tough time right now, but we can save your home! It's not too late! We know how to get through to your lender and work things out to save your house. Call this toll-free number immediately!"
The letters go to rich people, poor people, owners of big and small houses, and they generate hundreds of callbacks. But in most cases, the panicked homeowners who agreed to pay a fee of $1,200 to $1,300 for the foreclosure-prevention services in advance receive little or nothing in the way of help. The homeowners lose their houses to foreclosure, and the rescue company keeps sending out letters and pocketing fees.
Last month, the Federal Trade Commission settled with United Home Savers, a Florida company that allegedly operated like this and victimized more than 3,100 homeowners nationwide. The company and its officers denied any wrongdoing as part of the settlement but shut down the firm and agreed to a $4.1 million judgment and close federal monitoring of their future business activities. However, most of the judgment was suspended because United and its principals had only about $22,000 in their bank accounts when the FTC froze their assets under court order. United could not be reached for comment.
The 3,100 victims, in other words, probably won't see a dime in restitution.
"What really hurts," said Harold Kirtz, the FTC lawyer who led the government's case against United Home Savers, "is that a lot of these people not only lost money upfront, but they also fell further behind on their mortgages" during the weeks and months while they waited for United to work things out with their lenders.
United is one of hundreds of foreclosure-rescue operations that have prospered in the market bust. Reilly Dolan is familiar with many of them. He is the FTC's assistant director for financial practices and coordinator of Operation Loan Lies, a federal-state effort that has targeted 189 companies suspected in mortgage-modification or foreclosure-prevention scams. The FTC has brought or settled 19 cases against firms of this type in the past 12 months, Dolan said. "And more are coming."
