Victims Of Mortgage Modification Scam Lost More Than Their Homes

Image courtesy of David Crombie

Each year, fraudsters target vulnerable, trusting Americans by claiming that they can make their lives better. But when all the chips have fallen, these seemingly legit businesses often turn out to be just the opposite. While some of these operations will face the wrath of federal or state regulators, their victims are often left with little. 

In the case of a multi-million dollar mortgage scheme, the victims weren’t only left with without their homes, but sometimes without their family.

The Scheme

Last week, a federal judge in Virginia sentenced three individuals for their part in operating a nationwide home mortgage modification scam that bilked nearly $11 million from unsuspecting and vulnerable homeowners.

According to the Department of Justice, from March 2011 to Sept. 2014, ringleader Sammy Araya, along with more than a dozen co-conspirators, promised struggling homeowners that they could help them avoid foreclosure by providing them with mortgage modification assistance.

The scheme — which operated under the names Equity Restoration Group, Neighborhood Counseling Services of America, and Home Retention Center —  targeted victims through mass mailers and phone calls that falsely claimed the operation was a nonprofit affiliated with the real government program, the Home Affordable Modification Program that was designed to help homeowners at risk of foreclosure.

Customer service representatives would then tell customers that their mortgages could be modified if they provided their financial information, as well as information about the victim’s mortgage and how far behind the victim was on his or her mortgage payments. The rep would then review this information and determine if the homeowner was eligible for modification.

Another member of the scheme would then contact the customer and tell them they had qualified for modification. The victim would then be directed provide a required “reinstatement fee,” typically in the amount of thousands of dollars.

Victims were also told that they were required to make several “trial” mortgage modification payments. After these so-called “trial payments” were completed, their modification would be complete and their new lower mortgage payment would become permanent for the life of the loan.

In reality, the company pocketed the payments. The Department of Justice claimed that the money was used to further the operation, or in Araya’s case to purchase expensive vehicles, a racehorse, a variety of luxury goods, as well as fund a reality television show called Make It Rain.TV.

The Victims

The DOJ notes that the scheme had devastating consequences for targeted homeowners, many of whom were already in precarious financial situations.

While many of the victims lost their homes, other suffered other hardships, the Washington Post reports.

One Virginia woman tells the Post that she lost the home she had built specifically to meet the needs of her 4 feet 10 inch frame.

“I literally lost everything because of these people, and it’s breaking my heart,” the woman said, noting that she didn’t realize she was being scammed until her actual lender tried to post a foreclosure notice on her home.

The woman called the lender and told them she had been making mortgage modification payments to Araya’s company, which was supposed to pass along to the actual lender.

“I sent them the proof, and they said, ‘that’s not us,’ ” she told the Post. “I called the [Federal Trade Commission] and they said, ‘Honey, you’ve been scammed.’ ”

Another victim of the scheme tells the Post that he lost the home he had invested heavily into repair. When the bank foreclosed, he also lost everything inside, including expensive tools.

The man says that he first became involved with the company when he was looking to reduce payments on the home.

Unlike the previous victim, the man says the company told him to file for bankruptcy. But when he did, the company never showed to represent him as they had promised.

In other cases, the consequences of the scheme resulted in more than just lost homes. The Post reports that one couple divorced after becoming victims, while a mother said she had to put her daughter in a pediatric psychiatric ward after losing her home.

Putting An End To It

In all, the DOJ says 12 people have been convicted in the case and a related scam.

Ringleader Araya was entered to 20 years in prison after being convicted of multiple counts of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud.

Michael Henderson was sentenced to 12 years in prison,w while Jen Seko, who operated the mailing business that contacted potential victims, was sentenced to seven years.