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Commerce Charges Loan Modification Firm with Scamming 200 Homeowners

August 04, 2011

Commerce Charges Loan Modification Firm with Scamming 200 Homeowners Out of $362,000

For Immediate Release: August 4, 2011

Action is the latest in a series targeting loan mod companies for deceptive and dishonest practices that hurt desperate consumers trying to save their homes.

(ST. PAUL, MN) The Minnesota Department of Commerce has charged Eden Prairie-based Modify My Loan US, LLC, its owners and principals with allegedly defrauding approximately 200 homeowners, mostly from Minnesota, charging them a collective $362,203 in advance fees. The company, which began operations in Minnesota without a license, also allegedly used false advertising, failed to disclose to customers its precarious financial condition, charged customers fees for loan modification services which were ultimately not provided, and failed to make promised refunds.

According to the department, Modify My Loan US, LLC (MML) charged many Minnesota consumers advance fees ranging from $2,000 to $2,950 for loan modification services, even though the company's contracts with those customers promised no such fees would be charged. Roughly 200 homeowners paid a collective $362,203 in fees.

One homeowner who paid an upfront fee of $2,750 was given a version of the initial contract in which the money back guarantee had been removed. When she did not receive a loan modification, she did not receive a refund. Another homeowner paid for a loan modification in May 2009 and despite frequent attempts to get information on the status of negotiations on her loan, was unable to get satisfactory updates from MML. In October 2009, she received a notice of a sheriff's sale set for December 15th, 2009. On December 7th, 2009, MML notified her that her file had been reassigned that that it was aware of the sheriff's sale. She did not receive any further communication from the company and has not received a refund.

MML allegedly continued to market and to accept payments from customers even after it was clear the company was failing financially and no money was available for customer refunds.

"Companies and individuals like these think they can line their pockets with hard-earned money from consumers struggling to stay afloat," said Commerce Commissioner Mike Rothman. "Not on my watch. We're going to put a stop to it."

A prehearing conference on the case will be held at the Office of Administrative Hearings on Wednesday October 5th, 2011 at 1:30 p.m.

The case is one of several such loan modification scams investigated by the department in recent months. Details of similar, recent cases are below.

Save My Home USA Co. Inc., Jason and Justin McCallum and Chad Buchanan

In March, the department ordered Save My Home to cease and desist from doing business in Minnesota as residential mortgage originators or residential mortgage servicers. Michigan-based Save My Home USA Co. Inc. and its owners Jason and Justin McCallum and Chad Buchanan were charged with allegedly defrauding 118 Minnesota homeowners by taking upfront fees for loan modification services never provided to the consumers.

According to the department's investigation, Save My Home USA contacted the residents and convinced them to pay advance fees for loan modification services. The 118 homeowners allegedly paid a collective $289,020 in fees. Of the 23 homeowners contacted by the department, only one claims to have received loan modification services. Instead, residents lost as much as $1,000 to $4,000 per family, and fell farther behind on mortgage payments.

SafeHouse Professional Mortgage Restructuring (Safehouse), Certified Financial Protection Group (CFPG) & Michael Wayman

In February, the department ordered SafeHouse Professional Mortgage Restructuring and Certified Financial Protection Group, both of Temecula, Calif., and Michael Wayman of Menifee Calif., to each pay a $10,000 civil penalty, and barred them from residential mortgage origination or modification activity in Minnesota. The department also ordered them to cease and desist from holding themselves out as residential mortgage servicers or originators in Minnesota.
According to the department's investigation, Wyman, CFPG and Safehouse collected more than $12,000 in fees from Minnesota residents for loan modification services before performing services and without providing any "meaningful assistance."

LMS and Associates

Also in February, the department ordered Todd Jacobson and his company, St. Louis Park-based LMS and Associates, to each pay a $100,000 civil penalty for engaging in unlicensed loan modification activity in the state and for engaging in deceptive practices. The department's investigation revealed that between April 24, 2009 and October 27, 2009, the unlicensed LMS allegedly invoiced 105 files for a total of $250,941 in fees.  The company allegedly told customers it could assist with a number of services, including repayment plans, repayment restructuring, loan modification, refinancing or short sales and that the customer would receive a refund if LMS couldn't complete one or more of those services.  According to the department's investigation, LMS allegedly did not perform the services it said it would, yet failed to issue refunds to customers as promised.  In the case of a customer in Paynesville, Minnesota, LMS allegedly forged a customer's signature and used White-Out to alter information on forms.

Mortgage Auditors of America

In October, Mortgage Auditors of America (MAA) entered into a consent order with the department, agreeing to pay a $40,000 penalty ($20,000 of which was stayed) for deceptive practices and making false or misleading statements regarding loan modifications. The company was also ordered to refund consumers the money they paid for the services not rendered. According to the department's investigation, MAA operated a scheme by which they offered mortgage loan modifications to distressed homeowners who paid a fee ranging from $1,500 to $2,995 for a "forensic audit."  In return, the company allegedly offered to review the homeowner's mortgage closing documents to determine whether the homeowner had been a victim of mortgage fraud.  In addition, MAA allegedly offered homeowners "free" loan modification services through affiliates County Loan Modification or Take the Land on Profit Services.  The company advertised its services on KTTB-FM (B96) and allegedly claimed "There is no risk to call and no charge" if they could not help.

An investigation by the department revealed that MAA and its affiliates allegedly collected more than $27,000 in fees in at least 30 different cases.  The department found no evidence, however, that the companies had successfully modified any of the loans.

Neither Mortgage Auditors of America nor its affiliate, Take The Land Nonprofit Housing Corp., are licensed mortgage originators in Minnesota.  The department has issued a cease-and-desist order, demanding that MAA and its affiliates stop representing themselves as residential mortgage originators in Minnesota.

Tips for Consumers

  • Check with the Minnesota Department of Commerce to see if a Credit Service Organization is registered or if a Debt Management Company is licensed.

  • As of 2011, individuals and businesses providing mortgage origination and negotiation services are required by state law to be licensed with the National Mortgage Licensing System (NMLS), unless they are exempt.

  • Find out if the counseling agency is a member of a major association.  These organizations work to ensure that member agencies meet certain quality and ethical standards and that credit counselors receive proper training.

  • Choose an agency that offers free face-to-face counseling sessions to discuss your spending habits, arrange a budget and help you handle your personal finances. Signing up for consumer credit services or a debt reduction plan over the phone or the Internet puts you at risk for losing money to a fraudulent enterprise.

  • Get an agreement in writing and read it before you sign it.

  • Avoid companies that require high up-front fees, "voluntary contributions" or a high monthly service fees that only add to your debt. Most legitimate agencies charge about $10 to $20 to start up a debt repayment plan and less than $20 per month in service fees.

  • If you are dealing with a debt management company, make sure you are kept informed about when and how much of your monthly payment is going to your creditors

  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time span (most legitimate debt reduction plans take two to four years to repay) or promises to reverse a bad credit score.

  • There are several free, reputable loan counseling services that can assist consumers.

About the Minnesota Department of Commerce

The Minnesota Department of Commerce licenses and regulates mortgage originators, brokers, servicers and multiple other individuals and companies in the real estate industry. In addition to levying civil penalties and suspending or revoking licenses and barring companies from doing business in the state, the department refers cases to criminal authorities for prosecution. Consumers with complaints or questions may call the Minnesota Department of Commerce at (651) 296-2488 or toll free, (800) 657-3602.