WASHINGTON -- How's this for a business plan to make money during the housing bust? You buy or rent 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.
You send each homeowner on the list a personalized letter with this 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. Many panicked owners agree to pay a fee of $1,200 to $1,300 for the foreclosure prevention services in advance.
You can guess what happens next: Little or nothing in the way of help in most cases. The homeowners lose their houses to foreclosure, and the rescue company keeps sending out letters and pocketing fees.
Late last month, the Federal Trade Commission settled with a Florida-based company -- United Home Savers LLC -- that allegedly operated like this, and victimized more than 3,100 homeowners nationwide. The company and its officers denied any legal wrongdoing as part of the settlement, but have shut down the firm and agreed to a $4.1 million judgment and close monitoring by federal officials of their future business activities. However, most of the judgment was suspended because United Home Savers 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," says 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's staff counselors to work things out with their lenders.
That, in turn, made foreclosure for the homeowners even more likely.
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