A family that operated two Florida-based companies that promised to help distressed homeowners obtain loan modifications has agreed to surrender $2.2 million in assets to settle charges that the companies’ representatives violated laws governing telemarketers.
The Federal Trade Commission shut down Kirkland Young LLC in November 2009, alleging that the company and manager David Botton misrepresented themselves as mortgage lenders, servicers, or their affiliates, and made false promises to homeowners that they would help them obtain loan modifications.
A month later, the FTC added a related company, Attorney Aid LLC, as a defendant, along with Botton’s sister, April Botton Krawiecki, and father, Samy Botton.
In a complaint and other court filings, the FTC charged the companies conducted a national telemarketing campaign that led distressed homeowners to believe they were being contacted by their mortgage lender, loan servicer, or an affiliated company.
Employees of the companies allegedly identified themselves as working in the "loan modification department," and informed homeowners that they had received their application for a loan modification.
In many instances, the homeowners had contacted their lender or loan servicer asking for a loan modification, the FTC said in its complaint, aiding the companies’ representatives in gaining their trust.
The companies’ representatives claimed they could obtain loan modifications with substantially lower monthly payments and interest rates, the government charged. Homeowners were asked to use their credit cards to pay an upfront fee before they had received anything in writing about the services provided by the company, the FTC said.
Homeowners were then sent a package of documents in the mail, including a supposed "loan mitigation/modification" contract, and other documents to sign and return.
In "all or virtually all instances," the defendants failed to obtain the promised mortgage loan modifications, the FTC said in its complaint.
In agreeing to settle the charges, the Bottons and Krawiecki did not admit wrongdoing. The settlement imposes a $6.1 million judgment that will be suspended when Samy Botton has paid $300,000; David Botton has surrendered all of his real property, including a Long Beach, Calif., condominium, a 2003 BMW M3, and a boat; April Botton Krawiecki has surrendered real property including a West Hollywood, Calif., condo.
Kirkland Young LLC and Attorney Aid LLC have surrendered all of their assets, worth $2.2 million, the FTC said in a press release. A consent order bans both companies and all three individuals from offering mortgage relief services.
Under new rules that took effect Jan. 31, the FTC now bars for-profit companies that provide loan modification services from collecting advance fees.
In announcing the Mortgage Assistance Relief Services (MARS) rule in November, the FTC said it had brought more than 30 cases against companies that made false claims about their ability to negotiate loan modifications, short sales or other foreclosure relief.
The MARS rule also includes new disclosure requirements for real estate professionals who represent sellers in short-sale negotiations, discuss their clients’ delinquent mortgage situations, or refer clients to companies that specialize in loan workouts.
The FTC’s model language for disclosures was drawn up with consumers dealings with loan modification companies in mind, and can be confusing if applied to transactions between real estate agents and their clients, Inman News columnist Ken Harney wrote last month.
The National Association of Realtors has asked the FTC to clarify the MARS rules by carving out exceptions where disclosures might not be required or coming up with disclosure language that is more applicable to home sellers, Harney said.