The managers of two California-based companies are accused of collecting at least $3.3 million from Spanish-speaking homeowners without following through on promises to help them negotiate loan modifications with lenders to avoid foreclosure.
The Federal Trade Commission claims Jose Mario Esquer and Valentin Benitez managed two Downey, Calif.-based foreclosure rescue operations — Dinamica Financiera LLC and Soluciones Dinamicas Inc. — that violated the FTC Act by falsely claiming they would obtain mortgage loan modifications or stop foreclosure in all or virtually all cases.
The FTC said it had obtained a temporary restraining order shutting the businesses down and freezing their assets, and will now seek redress for consumers.
In its complaint, the FTC alleged the companies have made false or misleading claims in advertisements on Spanish-language radio and magazines since at least January 2006. Although the companies promised or implied that they could obtain mortgage loan modifications or stop foreclosures in all or virtually all cases, many who pay the fees end up in foreclosure and ultimately lose their homes, the FTC said.
Others who managed to save their homes did so "only through their own efforts and not because of any service provided by the defendants," the complaint alleges.
The companies may also face action by California regulators.
In California, only attorneys and licensed real estate brokers are permitted to collect fees in advance for negotiating loans modifications and short sales with lenders. Tom Pool, a spokesman for the California Department of Real Estate, said Esquer and Benitez are not licensed real estate brokers.
Pool said consumers should be aware that they can negotiate loan modifications themselves directly with loan servicers, or work with nonprofits that provide free foreclosure prevention counseling. Referals to HUD-approved housing counselors are available by calling (800) 569-4287.
Consumers who want to hire a licensed real estate broker and pay them in advance to perform such services can check a list of companies that have obtained approval to do so.
Real estate brokers who wish to collect fees in advance to perform mortgage modifications must enter into written agreements with homeowners before collecting any fees. The Department of Real Estate must sign off on the language to be used in the agreements before fees can be collected.
A "no objection" letter does not mean that department recommends, approves or endorses the agreement or the services of the real estate licensee.
The department also maintains a list of companies, licensed and unlicensed, that have been sent "desist and refrain" letters stemming from their mortgage modification or foreclosure rescue activities. To date, 242 companies have received letters and are scheduled for hearings.
"It’s a target-rich environment, to the extent that so many foreclosures are happening," Pool said. "If people can get educated, that’s our best bet to curb the abuses that are going on."
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