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Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, today announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”

The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.

The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. In each case the FTC is asking the court for consumer redress and a permanent bar on the deceptive practices. The FTC would like to thank the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury and the Special Inspector General of the Troubled Asset Relief Program (SIG-TARP) for their invaluable assistance in these cases.

The FTC also released “Real People. Real Stories,” a three-and-a-half minute video about keeping your home. It features people targeted by foreclosure rescue scammers sharing lessons learned from their experiences. The FTC is distributing the video, and a version in Spanish, to more than 5,000 housing counseling and consumer protection organizations around the country, and posting them at and

The FTC and the states of California and Missouri charged that US Foreclosure Relief falsely claimed years of experience and a high success rate and promised quick results. Instead, homeowners paid the defendants thousands of dollars for services they never received. The FTC also charged the defendants with violating the FTC’s Do Not Call Rule by calling consumers on the National Do Not Call Registry, and California and Missouri charged them with violating state laws that prohibit charging advance fees for foreclosure consulting services. The court immediately barred the practices and froze the defendants’ assets, pending a hearing.

Lucas Law Center allegedly used an attorney to circumvent state prohibitions against receiving a fee before providing any services; the defendants charged up to $3,995 in advance. In addition to falsely representing that they would obtain mortgage loan modifications, the defendants told some homeowners to stop paying their mortgage in order to pay the defendants’ fee. Consumers obtained promised refunds only after repeated complaints to the Better Business Bureau, the California Attorney General, the State Bar of California, or local criminal authorities. The court immediately barred the practices and froze the corporate defendants’ assets, pending a hearing.

Loss Mitigation Services marketed primarily through direct mail solicitation. The defendants allegedly targeted consumers whose mortgage payments have increased, who have made late payments, and whose homes were in foreclosure. They charged up to $5,500 in advance and promised that a loan modification was assured or virtually assured if consumers hired them. The defendants also misrepresented that they were a department of, or affiliated with, the consumer’s lender or mortgage servicer. In many cases, they failed to obtain loan modifications for consumers, some of whom lost their homes while waiting for the promised results.

The FTC alleged that Internet company Apply2Save charged consumers up-front fees of up to $995, claiming they could obtain a loan modification in 30 to 90 days. In fact, they did not obtain loan modifications for most consumers and were unable to stop foreclosures. In most cases, the defendants failed to contact or follow-up with consumers’ lenders. Consumers waited months with no action on their loans, while the defendants lied and told them that the lenders had lost their papers. The defendants have agreed to a court order barring further unlawful practices, pending trial.

In addition to these cases, the FTC reached a settlement with Foreclosure Solutions, LLC and Timothy Buckley, who claimed that, for a fee often exceeding $1,000, they would stop foreclosure (see press release dated April 29, 2008). Many consumers who paid the fee ultimately lost their homes, and others avoided foreclosure only through their own efforts. The settlement order prohibits the defendants from misrepresenting that any foreclosure can or will be stopped, postponed, or prevented, or the likelihood that these results will be obtained; the degree of past success of any efforts to achieve these results; the likelihood that a consumer will receive a full or partial refund if these results are not obtained; an ability to help all consumers, regardless of their individual circumstances; the number of satisfied customers or customer complaints; the terms of any refund or guarantee; and any other fact material to a consumer’s decision to purchase a foreclosure rescue service.

The order also bars the defendants from misrepresenting material facts in the sale of any good or service. In addition, the defendants are prohibited from selling or otherwise disclosing personal information about anyone who provided them with personal information. The order imposes an $8.5 million judgment that will be suspended upon turnover of approximately $5,000 in cash and other property, including the surrender of any net proceeds from the sale of five houses. The full judgment will be imposed if the defendants are found to have misrepresented their financial condition. The order also contains record-keeping and reporting provisions to allow the FTC to monitor compliance.

Operation Loan Lies follows an April 6, 2009, announcement by FTC Chairman Leibowitz, Attorney General Eric Holder, Treasury Secretary Timothy Geithner, Housing and Urban Development Secretary Shaun Donovan, and Illinois Attorney General Lisa Madigan that they would step up enforcement efforts against those who prey on homeowners in distress. Since then, when the FTC announced five similar foreclosure rescue law enforcement actions, the Commission has brought five more cases:

In the four FTC cases announced today, the Commission vote to issue each complaint was 4-0. US Foreclosure Relief, Lucas Law Center, and Loss Mitigation Services were filed in the U.S. District Court for the Central District of California. Apply2Save was filed in the U.S. District Court for the District of Idaho; the FTC acknowledges the assistance of the State of Idaho Attorney General’s Office.

These cases named the following defendants:

  • US Foreclosure Relief used eight aliases – U.S. Foreclosure Relief, Lighthouse Services, Pacific Shore Financial, California Foreclosure Specialists, H.E. Service Company, Safe Harbor, Pomery & Associates, and Homeowners Legal Assistance. Other defendants are George Escalante, Cesar Lopez, and Adrian Pomery, Esq.
  • Apply2Save – Apply2Save, Inc., Sleeping Giant Media Works, Inc., and Derek Oberholtzer.
  • Lucas Law Center – LUCASLAWCENTER “INCORPORATED,” Future Financial Services, LLC, Paul Jeffrey Lucas, Christopher Francis Betts, and Frank Sullivan.
  • Loss Mitigation Services – Loss Mitigation Services, Inc., Synergy Financial Management Corporation (d/b/a Direct Lender), Dean Shafer, Bernadette Perry, and Tony Perry.
  • In Foreclosure Solutions, the Commission vote to issue the stipulated final order was 4-0. The order was filed in the U.S. District Court for the Northern District of Ohio, Eastern Division.

The FTC asks people to report foreclosure rescue and mortgage modification scams to or by calling 1-877-FTC-HELP. The FTC makes those complaints available to federal, state, and local law enforcement through the Consumer Sentinel Network. The video also reminds homeowners in distress that free help is available from the Homeowner’s HOPE Hotline 888-995-HOPE (4673), which connects homeowners to HUD-certified housing counselors.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaints is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendant of a law violation. Stipulated orders have the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Contact Information

Frank Dorman
Office of Public Affairs
J. Reilly Dolan
Bureau of Consumer Protection